Love them or hate them? Wealth managers' verdict on dilution levies

Dilution levies are becoming increasingly popular among fund groups, but are they a hindrance to investing or a necessary feature to protect against short-term trading?

Last month, Somerset Capital Management introduced dilution levies of between 30bps and 50bps on three emerging markets funds, with group CEO Dominic Johnson admitting some investors had found the measure unpalatable. So how contentious are dilution levies, and what do fund buyers really think of them? An extra charge made to investors buying or selling units in a fund, dilution levies are designed to protect long-term investors by covering the cost of investors entering or exiting a fund. They are already in regular use throughout the industry. For example, Vanguard imposes a lev...