The Mystery of Portfolio Turnover Figures

I have been disappointed and frustrated with my endeavours of the past couple of days.

In an age of transparency it seems things are still not quite as clear as they ought to be with regard to fund management costs.

I am talking, of course, about the portfolio turnover rate (PTR).

Fund managers are now required to publish their ongoing charges figures (OCF) instead of being able to get away with just their annual management charge (AMC) or total expense ratio (TER), but this is not nearly enough information for anyone looking to truly appraise a fund.

The cost of buying and selling stocks in the fund can be huge. Some say that every 10% of PTR costs around 0.2% return. Some funds have giant PTRs, so this remains a huge hidden cost.

This is an argument I’ve been having over the past two days with a couple of very large fund management houses. The conversations have run as follows:

Me: “Hi there I am looking for the portfolio turnover figure for 2012 for the XYZ fund’

Guy on the helpdesk: “umm, arrrr, we erm, only give that information to Bloomberg, do you have a subscription? Erm, we don’t publish that information, errrr it doesn’t matter anyway does it?”

This says is all.

Portfolio turnover can create a huge drag on performance. Why bother quoting an OCF when this often doesn’t even cover the half of it?

Firstly, the people that I manage to speak to on the helpdesk rarely even know what the portfolio turnover is, let alone where I can find it. Then I get fobbed off with nonsense and find myself trawling through the annual reports of funds, often ending up none the wiser.

Let us please have a new transparency rule: Publish the portfolio turnover figures. They are important!

I drafted this a couple of days ago. Today, however, a glimmer of hope. In fact, I would say it was actually a mini success.

I fought with the fund house in question and low and behold – they gave me the PTR figures for the fund.

Alas, it just shows what you can achieve with a bit of fight

[Views are my own and not necessarily those of my employer.]