Comparing two seemingly similar funds — say, two global equity funds, or two UK corporate bond funds — often looks straightforward on the surface: check the headline percentage figure and pick the lower one. In practice, fund charges are more layered than a single number suggests, and a fund with a lower headline figure is not always the cheaper option once every cost is accounted for. A structured checklist approach helps ensure a genuinely like-for-like comparison rather than one based on a single, potentially incomplete number.
Step one: start with the Ongoing Charges Figure (OCF)
The OCF is the standardised, regulator-mandated figure that most closely approximates a fund's true annual running cost, combining the annual management charge with other regular fund expenses such as depositary, audit, and regulatory fees. It is designed to be more comparable across funds than the older, narrower "annual management charge" figure alone, precisely because it captures more of the true cost. As a general guide, passive index tracker funds commonly carry an OCF somewhere in the region of 0.05% to 0.25%, while actively managed funds more commonly range from around 0.5% to 1% or more, though there is considerable variation within both categories.
Where to find it
The OCF is published in a fund's Key Investor Information Document (KIID) or its successor disclosure documents, on fund factsheets, and usually within a platform's own fund research pages.
Step two: check for a performance fee
Some funds, particularly certain actively managed or alternative strategies, charge an additional performance fee on top of the base OCF when returns exceed a specified hurdle. Because a performance fee varies year to year, it will not be reflected consistently in a single OCF figure, so it is worth checking the fund's prospectus separately for any performance fee mechanism, its hurdle rate, and whether a high-water mark applies to prevent being charged twice for the same gain.
Step three: check the share class
The same underlying fund can be sold under multiple share classes with different charges — commonly a "clean" share class (charging only for fund management) versus an older "bundled" share class (which historically included a commission element and typically carries a noticeably higher OCF). Before comparing two different funds' OCFs, it is worth confirming that both figures relate to a clean share class on each side, since comparing a clean share class of one fund against a bundled share class of another would understate the true difference in cost.
Step four: check dealing and transaction costs
Beyond the OCF, funds incur transaction costs from buying and selling the underlying investments within the fund — these are sometimes disclosed separately as "portfolio transaction costs" or "transaction costs" under UK and EU-derived disclosure rules, and are not included within the OCF itself. Funds that trade their underlying holdings more frequently (a higher "portfolio turnover") tend to incur higher transaction costs, all else being equal, and this can be a meaningful additional drag that a simple OCF comparison would miss entirely.
Where to find transaction cost disclosures
These are typically found in a fund's costs and charges disclosure document, sometimes called a "Costs and Charges" or "MiFID II costs disclosure" statement, available from the fund manager or via the platform.
Step five: check the platform-level costs layered on top
Whichever fund is chosen, the platform's own custody fee and any dealing charges apply in addition to the fund's own charges, and are entirely independent of which fund is selected (though some platforms charge differently depending on whether a holding is a fund, a share, or an investment trust). A fair comparison between two funds should hold the platform cost constant, since it does not vary between funds held on the same platform, and focus the comparison specifically on the fund-level charges that do differ.
A worked hypothetical comparison
Suppose an investor is deciding between two hypothetical UK equity income funds, both available as clean share classes on the same platform, intending to invest £30,000.
| Feature | Fund A | Fund B |
|---|---|---|
| OCF | 0.55% | 0.85% |
| Performance fee | None | None |
| Disclosed transaction costs | 0.08% | 0.22% |
| Total estimated annual cost | 0.63% | 1.07% |
| Annual cost on £30,000 | £189 | £321 |
In this hypothetical, the OCF alone understates the true gap between the two funds — the difference widens from 0.30 percentage points to 0.44 percentage points once transaction costs are included, a difference of £132 a year on this sum, before considering any difference in investment performance between the two funds. This example uses illustrative figures only, constructed for comparison purposes, and does not represent any specific real funds.
Step six: consider what you are actually paying for
A lower charge is not automatically "better" if it comes with a materially different investment approach or objective — a passive index tracker fund and an actively managed fund are not directly comparable purely on cost, since they involve different strategies, objectives, and (potentially) different expected levels of risk and return dispersion. A fair fee comparison generally makes most sense between funds pursuing genuinely similar strategies and objectives (for example, two passive global trackers following similar indices, or two actively managed UK equity income funds with a similar stated approach), rather than between fundamentally different fund types purely because they happen to sit in the same broad sector classification.
A simple comparison checklist
- Confirm both funds' figures relate to a clean share class, not a bundled one.
- Compare the published OCF for both funds.
- Check for any performance fee, its hurdle, and whether a high-water mark applies.
- Check disclosed transaction costs, not just the OCF, particularly for more actively traded strategies.
- Confirm both funds are held on the same platform (or apply the same platform cost assumption) so platform-level charges do not distort the fund-level comparison.
- Confirm both funds pursue a genuinely comparable investment strategy and objective before treating the cost difference as decisive.
Putting the comparison in context
Because fund holdings are very often held within a Stocks and Shares ISA (annual allowance £20,000) or a SIPP (annual allowance £60,000 or 100% of earnings if lower), any cost saved through a more careful fund comparison compounds free of further UK tax on gains and income within those wrappers, in addition to the direct saving itself. This is a further reason a modest-looking percentage point difference in total fund cost, uncovered through a full checklist comparison rather than a quick glance at the headline OCF, can be worth the extra few minutes of research before committing new contributions or switching an existing holding.
Step seven: check for exit charges or dilution levies
A small number of funds apply a dilution levy or "swing pricing" mechanism, which adjusts the price at which units are bought or sold to reflect the cost the fund itself incurs when large flows of money enter or leave it — this is intended to protect existing investors from bearing the trading costs generated by other investors joining or leaving the fund, rather than being a charge in the traditional sense. It is worth checking a fund's prospectus for whether such a mechanism applies, particularly for less liquid asset classes such as property or smaller company funds, since it can occasionally affect the price achieved on a specific transaction, separately from the ongoing charges discussed above.
Using published comparison tools
Many UK platforms provide built-in fund comparison tools that display OCF, historical performance (with appropriate risk warnings that past performance is not a guide to future returns), and sometimes a comparison against a stated benchmark, side by side for several funds at once. Independent data providers and financial data services also publish standardised fund cost and risk figures that can be cross-checked against a platform's own figures. Using more than one source to verify a fund's charges before making a decision is a reasonable safeguard against a single source being out of date or displaying a figure for the wrong share class.
Checking the date of the disclosed figures
OCFs and other disclosed costs are typically reviewed and updated at least annually by the fund manager, so it is worth checking the "as at" date shown alongside any published figure, particularly for a fund that has changed manager, strategy, or size recently, since older cached figures on some comparison websites can occasionally lag behind the fund's current, officially published disclosure documents.
Revisiting the comparison periodically
Fund charges are not necessarily fixed for the life of a holding — a fund manager can, and occasionally does, change a fund's OCF, and fund sizes (which affect the potential for economies of scale, discussed further in a related article) also change over time. A checklist-based comparison carried out once, at the point a fund is first chosen, is a good starting discipline, but periodically repeating the same checklist against a held fund's current disclosure documents — say, every one to two years, or whenever a fund's factsheet is next reviewed for other reasons — helps confirm that a fund chosen for its cost-effectiveness some years ago remains competitive today.
Key takeaways
- The OCF is a more complete cost figure than the older annual management charge alone, but it still does not capture every cost a fund may incur.
- Performance fees, where they exist, are not reflected consistently in the OCF and need checking separately in the fund's prospectus.
- Comparing a clean share class against a bundled share class of a different fund understates the true difference in cost — always confirm the share class type first.
- Disclosed transaction costs, driven partly by portfolio turnover, sit outside the OCF and can meaningfully widen the true cost gap between two funds.
- Platform-level custody and dealing charges apply on top of fund charges and should be held constant when comparing funds on the same platform.
- A fair fee comparison works best between funds with genuinely similar strategies and objectives, not across fundamentally different fund types.