SINGAPORE (Feb 5): With the interest in exchange-traded funds (ETFs), which track the performance of an index such as the Straits Times Index, the Standard and Poor’s 500 index or the MSCI indices, the only reason active funds would be of interest to investors is if they outperform these benchmarks after expenses, or are less risky.

In the last six months, active fund managers have been in the spotlight as investors, clearly dissatisfied with sub-par returns, have flocked to lower cost alternatives in the form of ETFs.  Although fees charged by funds and ETFs are an important consideration when deciding which investment is better, the initial sales charge also matters.

This charge, also known as a front-end load, is levied when buying a unit trust fund via a distributor. Unlike management fees, which are paid to the fund manager and captured in the total expense ratio, the initial sales charge goes to the fund’s distributor for processing your purchase.

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