Are ILP Sub-Fund Fees Worth Paying? How To Judge Passive vs Active Funds
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The fee dashboard can show you how much a product may cost. The next question is whether the fee matches what the sub-fund is doing and how it has performed against its benchmark.
For most ILP sub-funds, a simple rule works well:
- If the sub-fund is basically tracking an index or wrapping a passive strategy, compare it like a passive product.
- If the sub-fund is an active unit trust, compare it like an active manager against the right benchmark, after fees.
That distinction matters because the right comparison depends on whether the sub-fund is mainly giving you market exposure or making a genuine active-management claim.
| Sub-fund type | What to compare | When the fee case is stronger | Warning sign |
|---|---|---|---|
| Passive or index-like | TER, tracking error, benchmark fit, all-in policy charges | The fund tracks a useful benchmark closely and you are paying only a modest extra layer for access or convenience | High fees for exposure that looks almost identical to a low-cost ETF |
| Active unit trust | Return versus benchmark after fees, consistency over 3/5/10 years, risk taken | The fund has a clear process and has delivered persistent outperformance after fees versus an appropriate benchmark | A short good period is used to support a much longer fee commitment |
TL;DR The key takeaways (1 min read)
If the fund is basically following an index, many investors would compare it on cost and how closely it tracks the market.
If the fund is actively managed, many investors would compare its returns against the right benchmark after fees.
If the product costs much more but gives you very similar exposure, it is worth asking what the extra fee is paying for.
If it is basically an index fund inside an insurance wrapper, compare the extra cost with the convenience or access you are getting in return.
If you are getting similar market exposure for a much higher fee, pause and ask what the extra cost is doing for you.
Search the current dataset
The framework is easier to apply when you can search real sub-funds instead of reading fee theory in the abstract.
The explorer below uses the current high-confidence subset where the official insurer PDF exposed:
- the annual fee
- the stated benchmark
- the annualised since-inception fund return
- the annualised since-inception benchmark return
- the inception date
That means the table is not yet the full ILP market. It is the portion of the market where the fee-versus-benchmark comparison is currently clean enough to defend from the source document itself.
Search ILP sub-funds by fee, asset mix, benchmark, and return gap
This version uses 548 high-confidence rows from official insurer PDFs. Use the as-of-date filter to keep comparisons within one reporting date or a recent-report cohort before you rank funds by return gap.
Only rows with fee, benchmark, inception, and at least one official return window from the source PDF.
23% of the current subset have non-negative excess return since inception.
Shown exactly as the insurer reports it, so compare labels as well as the number.
Median excess return is -1.2 pp.
Coverage note Return coverage is still a work in progress
This explorer currently covers 543 of
723 top-level ILP sub-funds with a clean
return-versus-benchmark comparison.
Show research coverage Current return coverage 75.1%
Return coverage is still a work in progress
This explorer currently covers 543 of 723 top-level ILP sub-funds with a clean return-versus-benchmark comparison.
This breakdown is mainly for research tracking. Most readers can ignore it and use the current subset as a screening tool.
| Sub-fund | Fee |
Asset mix
?Asset mix shows the rough split between equity and fixed income when the benchmark makes that clear. For example, a pure stock benchmark becomes 100% equity, while a 60/40 benchmark becomes 60% equity and 40% fixed income. It is a benchmark-based description, not the fund's live portfolio weights. | Benchmark | Fund | Benchmark | Gap | As of |
Sources
?We show the printed page number from the PDF itself, but the link jumps using the PDF viewer's internal page target. Those can differ when a document has front matter before the printed folio starts. Great Eastern's 2025 annual report is one example: printed page 35 opens with `#page=37`. Adobe: PDF page links MDN: URL fragments Great Eastern example |
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Select a sub-fund
Benchmark
Show evidence for this row
The gap is computed from the parsed fund and benchmark values shown for the selected return window in the source PDF.
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- Benchmark return
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- Return gap
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- Fee as displayed
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Return page
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The page shown here is the printed page label on the document. The link target may use a different internal PDF page index so the browser opens the right sheet.
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Fee page
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The printed citation page is shown for readability. The link uses the browser PDF viewer's page target, which can differ when the PDF includes unnumbered front matter.
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- Comparison quality
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- As of date
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The chart is deliberately narrow in scope. It compares the fund’s annualised return since inception against the benchmark’s annualised return since inception. It does not show the full return path through time, rolling windows, or risk-adjusted performance. Treat it as a screening tool, not a full recommendation engine.
Identify what you are actually buying
Before judging the fee, figure out whether the sub-fund is genuinely active or mostly delivering index-like exposure.
Tip 1: A benchmark is just the yardstick the fund should be compared against. For example, a global equity fund might be judged against a global stock index.
Clues that a sub-fund is mostly passive:
- The objective says it seeks to track, replicate, or closely follow an index
- Its holdings look very similar to a broad market benchmark
- Tracking error is highlighted in the factsheet
- The fund’s active share is low, meaning its holdings do not differ much from the benchmark
Clues that a sub-fund is genuinely active:
- The objective says it aims to outperform a benchmark
- The manager makes stock, sector, or timing calls
- Holdings are meaningfully different from the benchmark
- Performance discussion focuses on why the manager was overweight or underweight specific names or sectors
Investor.gov and SEC investor materials point readers toward the same core checks: review the prospectus, factsheet or shareholder report, benchmark, fees, and how closely the fund has behaved relative to what it says it does. That is especially useful for ILP sub-funds, where the insurance wrapper can make the total cost less obvious than a plain brokerage purchase.
If the sub-fund is passive, compare the wrapper
If the sub-fund is basically giving you broad market exposure, many investors would usually expect the fee bar to be lower.
Investor.gov and SEC fund guides point investors to a few core checks:
- Total Expense Ratio (TER): What does the fund itself charge each year?
- Tracking error: How closely does it follow the benchmark it claims to track?
- Benchmark fit: Is the benchmark actually the exposure you want?
- All-in cost: What do you pay once ILP policy charges, platform or wrap fees, and fund fees are layered together?
For passive exposure, low fees and low tracking error are often the main things investors look for. If a global equity or US equity sub-fund looks very similar to a common ETF, then the comparison may be fairly straightforward: if the exposure is nearly the same but the fee stack is much higher, it is reasonable to ask whether the extra cost is justified.
Tip 2: Tracking error means how much a passive fund drifts away from the index it is supposed to follow. Alpha means extra return above the benchmark after fees.
This is where comparisons can get muddled. The sub-fund may sound sophisticated, but if it is effectively just tracking a broad market exposure, much of the extra cost may be coming from the wrapper rather than the exposure itself. In that case, a useful question becomes: “What am I getting from this route that I would not get from a cheaper route to the same market?”
Passive fee checklist
- What is the sub-fund’s TER?
- What is its tracking error versus the stated benchmark?
- Is the benchmark the same exposure I could already buy through a low-cost ETF or index fund?
- After adding policy-level charges, what is my true annual drag?
If you cannot answer those four questions clearly, it may be hard to tell whether the passive fee is reasonable.
If the sub-fund is active, look for evidence of net alpha
Active management calls for a different test. The manager is not promising to track the market cheaply. Instead, the case for the higher fee usually rests on whether the manager’s skill has added value after fees.
That means the right comparison is not just raw return. It is return relative to the appropriate benchmark, after fees, over a meaningful period.
| What to ask | Why it matters |
|---|---|
| What benchmark should this fund be judged against? | A global equity fund is usually more fairly assessed against a relevant global equity index. The benchmark should match the fund’s mandate and risk. |
| Has the fund beaten that benchmark after fees? | You only keep the return after the fee drag. Gross outperformance is not enough. |
| Has it done so consistently across 3, 5, and 10 years? | A single good year can be luck. A repeatable edge is harder to fake. |
| Did the manager take much more risk to get there? | Higher return is less impressive if it came from a very different risk profile or heavy concentration. |
This is the core idea behind your article angle: if the sub-fund is active, the question is whether the extra return above the benchmark appears strong enough to support the fee.
If a fund charges 1.5% a year and beats its benchmark by only 0.3% a year over a relevant window, some investors may decide the fee is hard to justify. If it has not beaten the benchmark after fees at all, then the case for paying active-fund pricing may be harder to make.
Investor.gov and SEC materials explicitly point investors toward comparing a fund’s fees, shareholder report, and benchmark-relative performance over time. SPIVA’s scorecards are also useful context here: across many markets and long periods, a large share of active managers have tended to lag their assigned benchmarks. That does not mean every active fund is bad. It does suggest that active fees may deserve a higher bar.
Active fee checklist
- What is the benchmark?
- What were the annualised returns over 3, 5, and 10 years?
- What was the benchmark return over those same periods?
- What is the excess return after fund fees and other product-level charges?
- Has the manager been consistent, or are you mostly looking at one standout period?
Watch out for expensive closet indexing
One of the clearest mismatches is an “active” fund that charges active fees but behaves a lot like the benchmark.
If active share is low, holdings overlap heavily with the index, and long-term outperformance is weak, you may be looking at closet indexing. In plain English: you may be paying active-fund prices for something that still behaves a lot like an index fund.
That is the kind of case where fee scrutiny may matter most. The product story may sound active, but the economics can still look passive and expensive.
When paying the fee may be more defensible
Paying a higher fee can be easier to justify when:
- The fund provides genuinely differentiated active exposure and has beaten its benchmark after fees over a full market cycle
- The product solves a real implementation problem for you, not just a marketing one
- You value the bundled convenience enough to accept the cost, and you understand what that convenience is costing you
- The adviser is transparent about both fund-level fees and policy-level charges
When the fee case is harder to support
The fee case is usually harder to support when:
- The sub-fund is basically passive exposure with a much higher fee stack than a comparable ETF
- The benchmark is vague, absent, or keeps changing
- You are shown projected returns but not benchmark-relative returns
- The adviser focuses on headline performance but not tracking error, TER, or all-in charges
- Early-year charges, insurance costs, or surrender penalties make the total loss from fees much larger than the fund fee alone
A simple framework to use on the dashboard
After you see the cost estimate, ask these two questions:
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What am I paying for? Is this mainly market exposure, or is there a real claim of manager skill?
-
What is the evidence that the fee earned its keep? For passive funds, look for low cost and low tracking error. For active funds, look for persistent benchmark outperformance after fees.
That will usually get you further than debating whether a fee is “cheap” or “expensive” in isolation.
Enter each product's annual fee and expected return, choose a time frame, and see how the gap compounds over time. This is a simplified calculator: it assumes a starting amount, annual compounding, and one fee deduction per year.
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Projected value over time
Assumes the entered return and fee stay the same each year.
Simplified assumption set: one starting investment, annual compounding, no new contributions, no taxes, no spreads, and no separate policy charges beyond the fee you enter.
Practical takeaway: If the sub-fund is mostly passive, many investors would focus on all-in cost, benchmark fit, and tracking quality. If it is active, many investors would focus on long-run benchmark-relative returns after fees. If you still cannot say clearly what the extra fee is buying, pause before making a long-term commitment.
Sources
These references are useful if you want to read more about fee tables, fund reports, and benchmark-relative performance in the source material.
- Investor.gov: Mutual Fund and ETF Fees and Expenses - Investor Bulletin
- Investor.gov: How to Read a Mutual Fund Prospectus (Part 2 of 3: Fee Table and Performance)
- Investor.gov: How to Read a Mutual Fund or ETF Shareholder Report
- SEC: Mutual Funds and Exchange-Traded Funds (ETFs) - A Guide for Investors
- S&P Dow Jones Indices: About SPIVA
- S&P Dow Jones Indices: SPIVA U.S. Scorecard Year-End 2024