This is our latest update on the best low cost index trackers available to UK Investors. Note: We don’t include platform exclusive funds – they’re generally not a good deal overall.
Low costs – that’s the name of the game for passive investors. Performance is unpredictable and elusive, but costs are nailed on. They nibble away at your returns like a satanic mouse – harmless enough at first, until you realise all your cheese has gone.
As Morningstar puts it:
If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision.
That’s why I try to leave no penny un-pinched when searching for cheap funds.
As a passive investor, I concentrate mostly on index funds and Exchange Traded Funds (ETFs). That’s because they are the simplest cut-price vehicles available. However, some asset classes aren’t well served by index trackers, so I’m happy to use low cost active funds to fill the breach.
My picks are based purely on price as measured by the Ongoing Charge Figure (OCF). There are other factors to consider when buying a fund (like tracking error, liquidity, and size) so it’s always worth reading any documentation to make sure it fits your bill.
Identifying tickers or ISIN codes are given in brackets. If there are any other wrinkles worth mentioning, I’ll throw them in along the way.
Finally, if you’re looking for the cheapest place to buy and hold these funds then take a butcher’s at our online broker comparison table.
The UK’s best low cost index trackers
Right, let’s grab some bargains!
Note: Anything not labelled ETF or ETC will be an index fund. Codes are given for accumulation funds variants where available.
UK large cap equity
Cheapest
- HSBC FTSE All Share Index Fund Institutional (GB0030334345) OCF 0.02%
Next best
- Lyxor Core Morningstar UK ETF (LU1781541096) OCF 0.04%
- Fidelity Index UK Fund P (GB00BJS8SF95) OCF 0.06%
- HSBC FTSE All Share Index C (GB00B80QFX11) OCF 0.06%
UK mid cap equity
Cheapest
- Vanguard FTSE 250 ETF (VMID) OCF 0.1%
Next best
- L&G UK MID Cap Index Fund I (GB00BQ1JYX87) OCF 0.14%
- Xtrackers FTSE 250 ETF (LU0292097317) OCF 0.15%
UK small cap equity
There are no good tracker options in the UK small cap asset class for DIY investors. Of the funds listed below, the iShares ETF is more of an expensive FTSE 250 tracker, and the rest are active funds.
Cheapest
- Schroder Institutional UK Smaller Companies (GB0007893984) OCF 0.52%
Next best
- iShares MSCI UK Small Cap (CUKS) OCF 0.58%
- Cavendish Opportunities Fund C (GB00B9F9Z985) OCF 0.65%
- Baillie Gifford British Smaller Companies B (GB0005931356) OCF 0.67%
UK value equity
Most UK tracker options are only an approximation of this asset class:
Cheapest
- 7IM UK Equity Value Fund C (GB00BWBSHV64) OCF 0.35%
Next best
- Vanguard FTSE UK Equity Income Index (GB00B59G4H82) OCF 0.22%
- WisdomTree UK Equity Income ETF (WUKD) OCF 0.29%
- SPDR S&P UK Dividend Aristocrats ETF (UKDV) OCF 0.3%
The 7IM fund takes the top spot because it’s the one UK tracker that explicitly follows a value methodology. The remainder are high-yielding funds, not true value funds. A high-yielding fund is a distant cousin of value and not always a pretty one at that. Pure value funds are available in the UK through Dimensional Fund Advisors, but only via an associated IFA who will charge you fees.
World equity – developed world and emerging markets (total world)
Cheapest
- HSBC FTSE All-World Index Fund C (GB00BMJJJG09) OCF 0.18%
Next best
- Vanguard Lifestrategy 100% Equity Fund (GB00B41XG308) OCF 0.22%
- Vanguard FTSE Global All Cap Index Fund (GB00BD3RZ582) OCF 0.24%
- Fidelity Allocator World Fund Y (GB00B9777B62) OCF 0.25%
- Vanguard FTSE All-World ETF (LCWL) OCF 0.25%
Vanguard Lifestrategy and Fidelity Allocator invest in other index trackers. Fidelity invests in REITs and small caps.
World equity – developed world only
Cheapest
- Fidelity Index World Fund P (GB00BJS8SJ34) OCF 0.12%
Next best
- Lyxor Core MSCI World ETF (LCWL) OCF 0.12%
- L&G Global 100 Index Trust I (GB00B0CNH056) OCF 0.14%
- HSBC MSCI World ETF (HMWO) OCF 0.15%
World ex-UK equity
Cheapest
- L&G International Index Trust I (GB00B2Q6HW61) OCF 0.13%
Next best
- Vanguard FTSE Dev World ex-UK Equity Index (GB00B59G4Q73) OCF 0.15%
- Aviva Investors International Index Tracking SC2 (GB00B2NRNX53) OCF 0.31%
- Xtrackers FTSE All-World ex-UK (XWXU) OCF 0.4%
You can also pick ‘n’ mix using individual US, Europe ex-UK, Japan, and Pacific ex-Japan trackers.
World value equity
Cheapest
- Vanguard Global Value Factor ETF (VVAL) OCF 0.22%
Next best
- Xtrackers MSCI World Value Factor ETF (XDEV) OCF 0.25%
- iShares Edge MSCI World Value Factor ETF (IWVL) OCF 0.3%
- Lyxor SG Global Value Beta ETF (SGVL) OCF 0.4%
Vanguard’s Global Value Factor ETF is classified as an active fund because it does not follow an index. It does follow a low-cost, rules based approach however, which is why it makes the list. All factor based investing is effectively straying into active management territory – you hope that a subset of the market can outperform – the key is to choose products underpinned by sound financial theory, a verifiable set of rules and a commitment to low costs.
World small cap equity
Cheapest
- L&G Global Small Cap Index Fund (IE00BG0VVG79) OCF 0.2%
Next best
- iShares MSCI World Small Cap ETF (WSML) OCF 0.35%
- Vanguard Global Small-Cap Index Fund (VIGSCA) OCF 0.38%
Emerging markets equity
Cheapest
- iShares Cores MSCI Emerging Markets IMI ETF (EMIM) OCF 0.18%
Next best
- Fidelity Index Emerging Markets Fund P (GB00BHZK8D21) OCF 0.2%
- Xtrackers MSCI Emerging Markets Index ETF (XMME) OCF 0.2%
- Amundi ETF MSCI Emerging Markets ETF (AUEG) OCF 0.2%
Socially responsible investing
Cheapest
- L&G UK Equity ETF (IE00BFXR5R48) OCF 0.05%
Next best
- Xtrackers ESG MSCI World ETF (XZW0) OCF 0.2%
- Royal London Emerging Markets ESG Leaders Equity Tracker (GB00BZ8FWL65) OCF 0.3%
- iShares Sustainable MSCI Emerging Markets SRI ETF (SUSM) OCF 0.35%
Multi-factor
Cheapest
- Lyxor FTSE UK Quality Low Vol Dividend (DOSH) OCF 0.19%
Next best
- Invesco Global ex UK Enhanced Index Fund Y (GB00BZ8GWR50) OCF 0.23%
- Invesco UK Enhanced Index Fund Y (GB00BZ8GWW04) OCF 0.23%
- HSBC Multi Factor Worldwide Equity ETF (HWWA) OCF 0.25%
- Amundi ETF Global Equity Multi Smart Allocation Scientific Beta ETF (SMRU) OCF 0.4%
- Lyxor JP Morgan Multi-Factor World Index ETF (LYXW) OCF 0.4%
All factor based investing is effectively straying into active management territory – you hope that a subset of the market can outperform – the key is to choose products underpinned by sound financial theory, a verifiable set of rules and a commitment to low costs.
Property – UK
Cheapest
- iShares UK Property ETF (IUKP) OCF 0.4%
- iShares MSCI Target UK Real Estate ETF (UKRE) OCF 0.4%
Next best
- No index fund alternative
Property – global
Cheapest
- L&G Global Real Estate Dividend Index I (GB00BYW7CN38) OCF 0.2%
Next best
- iShares Global Property Securities Equity Index Fund D (GB00B5BFJG71) OCF 0.22%
- Amundi ETF FTSE EPRA/NAREIT Global ETF (EPRA) OCF 0.24%
- SPDR Dow Jones Global Real Estate ETF (GBRE) OCF 0.4%
Includes emerging markets exposure.
All-commodities
Cheapest
- L&G All Commodities ETF (BCOM) OCF 0.15%
Next best
- Invesco Bloomberg Commodity ETF (CMOD) OCF 0.19%
- Lyxor Commodities Thomson Reuters/CoreCommodity CRB TR ETF (CRBL) OCF 0.35%
Gold
Cheapest
- iShares Physical Gold ETC (SGLN) OCF 0.25%
- ETFS Physical Swiss Gold ETC (SGBS) OCF 0.25%
- db Physical Gold ETC (XGLD) OCF 0.25%
Gold trackers are Exchange Traded Commodities (ETCs).
UK Government bonds – intermediate duration
Cheapest
- Lyxor Core FTSE Actuaries UK Gilts (GILS) OCF 0.07%
Next best
- Vanguard UK Government Bond ETF (VGOV) OCF 0.12%
- SPDR Barclays UK Gilt ETF (GLTY) OCF 0.15%
- Vanguard UK Gov Bond Index (IE00B1S75374) OCF 0.15%
- L&G All Stocks Gilt Index Trust I (GB00B8344798) OCF 0.15%
UK Government bonds – long
Cheapest
- SPDR Barclays Capital 15+ Year Gilt ETF (GLTL) OCF 0.15%
- Vanguard UK Long-Duration Gilt Index fund (GB00B4M89245) OCF 0.15%
UK Government bonds – short
Cheapest
- Lyxor FTSE Actuaries UK Gilts 0-5Y ETF (GIL5) OCF 0.07%
Next best
- JPMorgan BetaBuilders UK Gilt 1-5 ETF (JG15) OCF 0.1%
- SPDR Barclays Capital 1-5 Year Gilt ETF (GLTS) OCF 0.15%
- iShares UK Gilts 0-5 ETF (IGLS) OCF 0.2%
UK Government bonds – index-linked
Cheapest
- Lyxor FTSE Actuaries UK Gilts Inflation-Linked (GILI) OCF 0.07%
Next best
- Vanguard UK Inflation Linked Gilt Index fund (GB00B45Q9038) OCF 0.15%
- L&G All Stocks Index Linked Gilt Index Trust I (GB00B84QXT94) OCF 0.15%
- iShares Index Linked Gilt Index Fund D (GB00B83RVT96) OCF 0.16%
International bonds hedged to £ (government and corporate)
Cheapest
- Vanguard Global Bond Index (IE00B50W2R13) OCF 0.15%
Next best
- Vanguard Global Short Term Bond Index (IE00BH65QG55) OCF 0.15%
- iShares Global Government Bond ETF (IGLH) OCF 0.25%
- Xtrackers Global Sovereign ETF (XGSG) OCF 0.25%
All hedged back to Sterling.
International inflation-linked bonds hedged to £
Cheapest
- Xtrackers Global Inflation Linked Bond ETF (XGIG) OCF 0.25%
- Royal London Short Duration Global Index Linked Fund M (GB00BD050F05) OCF 0.25%
Next best
- L&G Global Inflation Linked Bond Index I (GB00BBHXNN27) OCF 0.27%
- Smith & Williamson Global Inflation Linked Bond Fund X (IE00B7RG6563) OCF 0.32%
- Royal London Global Index Linked Fund Z (GB00B53R4H74) OCF 0.39%
All hedged back to Sterling. Royal London and Smith & Williamson funds are active.
UK Corporate bonds
Cheapest
- L&G Sterling Corporate Bond Index Fund I (GB00B4M01C47) OCF 0.14%
Next best
- L&G Short Dated Sterling Corporate Bond Index Fund I (GB00BKGR3H21) OCF 0.14%
- Vanguard UK Investment Grade Bond Index (IE00B1S74Q32) OCF 0.15%
- iShares £ Ultrashort Bond ETF (ERNS) OCF 0.09%
Note: The iShares ETF doesn’t take top spot because it’s a specialist ultrashort bond tracker with a duration of a third of a year. Not for general use but could be handy for deaccumulators.
Concluding thoughts on low cost trackers
If you’re new to passive investing then it might seem like you now have a lot of decisions to make after reading that lot.
This piece on designing your own asset allocation will help you construct your own portfolio. If you want a quick short-cut then you can do a lot worse than picking a fund-of-funds instant portfolio solution.
We only update this post periodically. Please bear in mind the quoted OCFs may date as fund groups fight their turf wars by undercutting each other (hurrah). But this list should still prove an excellent starting point for your research.
And if anyone comes across any better index tracker options I’d love to hear about them in the comments below.
Take it steady,
The Accumulator
Note: Some comments below may refer to an older collection of low cost index trackers. Scroll down for the latest thoughts.
from Monevator https://monevator.com/low-cost-index-trackers/
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