The Virgin FTSE All-Share Tracker Fund has a total expense ratio (TER) of 1 per cent, several times the price of other funds tracking the same index.
It uses State Street Investors as a manager, but is a passively managed fund available through Virgin Money and is also available through Hargreaves Lansdown, Fidelity and Transact. Virgin offers it as part of an individual savings account (Isa) wrapper, but it is also available as a unit trust.
Because of the vast array of companies they have to track, FTSE All-Share trackers are relatively thin on the ground and do tend to be pricier than some other tracker funds.
But State Street, Scottish Widows (SWIP) and F&C offer similar, but much cheaper propositions. The SWIP FTSE All-Share Index Tracker (ISIN: GB00B632C647) is the cheapest with a TER of just 0.1 per cent - however, this is available exclusively to Hargreaves Lansdown clients and comes with a monthly platform fee of £2 per account. Both SPDR FTSE UK All Share ETF (Ticker: FTAL, ISIN: IE00B7452L46) and F&C FTSE All-Share Tracker (ISIN: GB0033138024) come in at just 0.3 per cent - just a third of the price of the Virgin fund.
The fund employs a sampling approach, which makes use of a full replication methodology that supposedly results in a very small tracking error. Its total tracking error (before charges) as against the FTSE All-Share Index from June 2006 to end of October 2012 was 0.06 per cent.
Virgin Money declined to be interviewed on the fund, but a spokesperson said it is more accessible than its competitors, which may explain why the charges are higher than others - such as F&C's fund that has a minimum investment of £1,000.
They told Investors Chronicle: "In terms of an investment decision, cost is an important consideration, but not the only consideration.
"We allow investors to put in as little as £1, whereas many trackers impose minimum monthly payments such as £50 a month, which some people cannot afford.
"Smaller investment amounts are costlier to administer and we've opened up the market to a host of people who previously would have been excluded from investing in the stock market.
"For many customers, talking about annual management charges (AMC), TERs, bid/offer spreads, exit fees, etc, is not what they want. They prefer to invest in a simple, straightforward investment product that they understand and where they know with certainty what the charges will be.
"This is the reason why both our AMC and TER are 1 per cent - ie, our charges are not hidden by having a low AMC and a larger TER. We do not have any other hidden charges such as exit fees."
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