Cost and Charges

Why am I receiving the new Cost and Charges report in my valuation?

Under new rules that have been recently introduced by the MiFID II regulations, all investment companies must now explicitly report the Costs and Charges incurred in the management of portfolios. This report is Waverton’s annual report presenting these Costs and Charges
 
These costs have always been applied to your investments but have not been disclosed as comprehensively as in this new report.

Why do my Cost and Charges reported differ from the management Fees that have been previously invoiced and paid?

Management Fees shown in your valuation statement summary or invoice represent Waverton’s annual charge for the investment product or service provided by the company. These are usually debited from your investment directly or via remittance.
 
Your quarterly valuation also details information about any dealing charges and stamp duty or taxes incurred during transactions that have taken place over the reported period.

The new Costs and Charges report provided in your current valuation includes these direct charges but also shows any underlying costs involved in holding certain types of investments. These have not been explicitly reported before – Please note that no additional charges have been applied to your account.
 
Specialist third party funds have ongoing and transaction costs that are not directly deducted from your investment but affect the funds valuation and therefore the performance of the fund – this is commonly known as the Total Expense Ratio (TER). All investors are affected by them.
 
How do I understand the cost and charges of my investments?

The Cost and Charge report is broken down into three main Sections:
 
Section 1: Total Costs and Charges

This provides the total amount incurred by your investment over the reported period and is broken into the following sub-sections -
 
  • Waverton Service Charges – the management and service costs of having your investment held at Waverton – as reported on your quarterly valuation statement.
  • Collective and Waverton fund costs – On-going and transaction charges incurred by the fund(s) that you are invested in.
  • Execution charges – External brokerage, Stamp, tax or market charges that are applied as part of any transactions undertaken.

The above section is subsequently broken down further on page 2 of your Costs and Charges report, this provides a summary of all the service, product and execution charge types.


Section 2: Overall Waverton vs Non-Waverton Costs Split

This displays the difference between the charges applied by Waverton in the operation and servicing of your investment and those incurred by third parties, these include VAT, execution and third-party managed fund charges.

 
Please contact your Portfolio Manager for further information regarding the charges incurred on the Non-Waverton third party managed funds

Section 3: Cumulative effect of Costs and Charges on your return
 
This section demonstrates the amount of return your investment would have generated if no Costs and Charges were incurred, known as the the ‘Gross’ return and the effect on the investments return due to the Costs and Charges – the ‘Net’ return
 
The charges your portfolio incurs has an effect on its total return. This effect is referred to as the "Cumulative Effective" and represents the difference between your portfolio's Gross Return - the return of your portfolio with zero charges and Net - the return of your portfolio after taking in to account Costs and Charges
 

 
The percentage amount contained within the black horizontal bar is the Gross return, this is what the return of your portfolio would have been if no charges had been applied.

The two bars below the Gross return contain the Costs and Charges cumulative percentage and the Net return, this is the return of your portfolio after taking in to account the Cost and Charges.

What is the difference between the Total Cost and Charges and the Cumulative Effect percentage amounts?

The Total Costs and Charges percentage is calculated based on the average portfolio value over the reported period.

The Cumulative effect shows the total effect costs and charges have had on the return you have received on all of the investments held in the portfolio over the reported period. 

The Cumulative effect on return calculation in the Cost and Charges report is derived by providing a notional gross percentage figure for the investments based on no costs or charges being applied. The net percentage performance figure is also provided and is calculated to indicate the return after all costs and charges have been applied to the portfolio.

The difference between the gross and net return is the Cumulative effect on Return

What period does the Costs and Charges report against?

The Cost and Charges report included in your valuation covers the entire year of 2018.

Description of Charges

Waverton Service Charges – these are charges that are paid to Waverton Investment Management Limited and are comprised of the annual management fee, foreign exchange and handling/administration charges

Collective Investment Charges (Funds) – these are costs that are included in the price quoted for investment products such as funds. These costs include (where applicable):
 
  • One off charges – entry or exit costs paid to the product provider at the beginning and/or end of investment of the product
  • Management charges - these are the charges for the management of the investment product that is paid to the product provider during the period of invested in the investment product
  • Ongoing Charges – These charges include the Management Charges and associated administration fees such as the audit, registration(s), custody and trustee fees required in the running of a fund. The ongoing charges figure is calculated in accordance with the funds regulatory requirements
  • Transaction Costs – Any costs and charges that were incurred trading underlying investments within the investment product
  • Performance Fees – these can be charged by a product provider when applicable
The Costs and Charge report also provides a breakdown of the Collective Investment Charges between those received by Waverton Investment Management Limited and those received by third parties:
  • Waverton in-house managed funds costs – These are the transaction and other associated administration costs incurred by
  • Waverton in the management of the in-house fund(s) and are not received by Waverton Investment Management Limited
  • Waverton in-house managed funds AMC – These are the fees that are received by Waverton Investment Management Limited for the management of its fund(s) that are held within the portfolio.
  • Non-Waverton third party managed funds – These are the fees charged by investment products held in the portfolio that are managed by external providers and are not received by Waverton Investment Management Limited.
Execution Charges – These are the transaction charges incurred when buying or selling a security, these include brokerage, stamp duty, overseas market charges and levy