We’ve updated this article to cover the best low cost index trackers now on the market. It replaces the previous version.

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.

I presented my top, low cost picks in the lazy portfolio post. But it’s nice to have a choice, especially when Britain’s cheapest index funds come with a catch.

So, for your ascetic delight and entertainment, I now bring you: Britain’s cheapest index trackers and their next best alternatives.

High cost funds gobble returns

As an avowed passive investor, I’m concentrating purely on index funds and Exchange Traded Funds (ETFs). That’s because they are the simplest cut-price vehicles available.

I’m also sticking to the broad market categories recommended in the lazy portfolios. They offer ample diversification at a low cost. I’m not into kinky stuff like short Brazilians.

My picks are based purely on price as measured by the Ongoing Charge Figure (OCF), and any other upfront fund fees that may apply. 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.

One such wrinkle is the impact of the Retail Distribution Review (RDR) upon the UK investing scene. In short, RDR has led to a split between the kinds of funds held by online brokers.

Some stock new clean class funds, which are generally cheaper than the older retail class funds.

However, small investors will often be better off with the more expensive (by OCF) retail class funds because the clean class funds come with extra charges like platform fees and dealing fees.

So in the roundup that follows I’ve included a ‘best retail class fund’ category (where the choice is available) to help address that conundrum.

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: The Vanguard, HSBC, BlackRock, and L&G funds listed below are index funds. Codes are given for the accumulation funds; income fund equivalents are generally also available. All other options are ETFs.

Domestic equity

Cheapest

  • Vanguard FTSE 100 ETF (VUKE) OCF 0.1% 1

Next best

  • Royal London FTSE 350 Tracker Fund (GB00B523MH29) OCF 0.12%, initial fee 0.5%
  • BlackRock UK Equity Tracker D (GB00B7C44X99) OCF 0.17%
  • Vanguard FTSE UK Equity Index (VVUKEQ) OCF 0.15%, initial fee 0.5%

Best retail class 

  • HSBC FTSE All Share Index Fund (GB0000438233) OCF 0.28%

Domestic small cap equity

There are no good tracker options in this asset class. Each of the following is flawed to some degree (with Aberforth it’s because it’s not a tracker at all!)

Domestic value equity

Again, UK tracker options are only an approximation of this asset class:

Cheapest

  • Vanguard FTSE UK Equity Income Index (VVUEIN) OCF 0.25%, initial fee 0.5%

Next best

  • Amundi ETF FTSE UK Dividend Plus ETF (AUKD) OCF 0.29%2
  • SPDR S&P UK Dividend Aristocrats ETF (UKDV) OCF 0.3%

Note: These are high-yielding funds, not true value funds. There aren’t any UK value trackers available on the open market. A high-yielding fund is a distant cousin of value and not always a pretty one at that. Value funds are available in the UK through Dimensional Fund Advisors, but only via an associated IFA who will charge you fees.

World equity

Cheapest

  • Vanguard FTSE All-World ETF (VWRL) OCF 0.25%

Next best

  • HSBC MSCI World ETF (HMWO) OCF 0.35%
  • Amundi ETF MSCI World – A (FR0010756098) OCF 0.38%
  • SPDR MSCI ACWI ETF (ACWI) OCF 0.5%

The Vanguard and State Street ETFs contain an emerging market component. HSBC and Amundi cover the developed world only.

Best retail class 

  • L&G Global 100 Index Trust R (GB0031978918) OCF 1.15%

International ex-UK equity

Cheapest

  • Vanguard FTSE Dev World ex-UK Equity Index (VVDVWE) OCF 0.3%

Next best

  • L&G International Index Trust F (GB00B2Q6HW61) OCF 0.36%
  • db x-trackers FTSE All-World ex-UK (XWXU) OCF 0.4%

Includes emerging markets exposure.

You can also pick ‘n’ mix using Vanguard and HSBC’s full suite of US, Europe ex-UK, Japan, and Pacific ex-Japan international index funds.

Best retail class 

  • L&G International Index Trust R (GB00B2Q6HT33) OCF 0.9%

International ex-UK value equity

Cheapest

  • db x-trackers Stoxx Global Select Dividend 100 ETF (XGSD) OCF 0.5%

This is another high-yielding fund. My previous ‘value’ comments apply.

Next best

  • iShares Euro Stoxx Total Market Value Large ETF (IDJV) OCF 0.4%

It only covers large cap funds in the Eurozone, but it is a value fund.

International ex-UK small cap equity

Cheapest

  • Vanguard Global Small-Cap Index Fund (VIGSCA) OCF 0.4%

This fund includes the UK – to the tune of around 8%.

Next best
Roll your own with ETFs for Europe, the US and Japan:

  • Amundi ETF Euro Stoxx Small (FR0010900076) OCF 0.3%
  • CS ETF (IE) on MSCI USA Small Cap (CUSS) OCF 0.43%
  • CS ETF (IE) on MSCI Japan Small Cap (CJPS) OCF 0.58%

Emerging markets equity

Cheapest

  • BlackRock Emerging Markets Equity Tracker Fund D (GB00B84DY642) OCF 0.32%

Next best

  • Vanguard FTSE Emerging Markets ETF (VFEM) OCF 0.45%
  • Vanguard Emerging Markets Index (VIEMKT) OCF 0.55%, initial fee 0.25%
  • SPDR MSCI Emerging Markets Small Cap ETF (EMSM) OCF 0.65%

Best retail class 

  • BlackRock Emerging Markets Equity Tracker Fund A (GB00B65W2626) OCF 0.67% 

Low volatility

Cheapest

  • iShares MSCI World Minimum Volatility ETF (MVOL) OCF 0.3%

Next best

  • Ossiam ETF FTSE 100 Minimum Variance (LU0705291739) OCF 0.45%

Property – UK

Cheapest

  • iShares FTSE EPRA/NAREIT UK Property ETF (IUKP) OCF 0.4%

Next best

  • No index tracker alternative

Property – global

Cheapest

  • BlackRock Global Property Securities Equity Tracker D (GB00B5BFJG71) OCF 0.33

Next best

  • HSBC FTSE EPRA/NAREIT Developed ETF (HPRD) OCF 0.4%
  • SPDR Dow Jones Global Real Estate ETF (GBRE) OCF 0.4%

Includes emerging markets exposure.

Best retail class 

  • BlackRock Global Property Securities Equity Tracker A (GB00B670Q951) OCF 0.67

All-commodities

Cheapest

  • Lyxor ETF Commodities Thomson Reuters/Jefferies CRB TR  (CRBL) OCF 0.35%

Next best

  • Source LGIM Commodity Composite Source ETF (LGCF) OCF 0.4%
  • iShares S&P GSCI Dynamic Roll Commodity Swap (SDYC) OCF 0.45%

Designed to mitigate contango.

  • ETFS All Commodities £ DJ-UBSCI ETC (AGCP) OCF 0.49%

Gold

Cheapest

  • iShares Physical Gold ETC (SGLN) OCF 0.25%

Next best

  • db x-trackers Physical Gold ETC (XGLD) OCF 0.29%

Both trackers are Exchange Traded Commodities (ETCs) backed by physical gold.

UK Government bonds – mixed duration

Cheapest

  • Vanguard UK Government Bond ETF (VGOV) OCF 0.12%

Next best

  • SPDR Barclays Capital UK Gilt ETF (IE00B3W74078) OCF 0.15%
  • Vanguard UK Gov Bond Index (VIUKGO) OCF 0.15%, initial fee 0.1%
  • BlackRock UK Gilts All Stocks Tracker D (GB00B83HGR24) OCF 0.16%

Best retail class 

  • L&G All Stocks Gilt Index Trust (GB0002051406) OCF 0.23%

UK Government bonds – long

Cheapest

  • SPDR Barclays Capital 15+ Year Gilt ETF (IE00B6YX5L24) OCF 0.15

Next best

  • Vanguard UK Long-Duration Gilt Index fund (VVUKLD) OCF 0.15%, initial fee 0.1%

UK Government bonds – short

Cheapest

  • SPDR Barclays Capital 1-5 Year Gilt ETF (IE00B6YX5K17) OCF 0.15

Next best

  • iShares FTSE Gilts 0-5 ETF (IGLS) OCF 0.2%
  • db x-trackers iBoxx £ Gilts 1-5 ETF (LU0429458978) OCF 0.2%

UK Government bonds – index-linked

Cheapest

  • Vanguard UK Inflation Linked Gilt Index fund (GB00B45Q9038) OCF 0.15%, initial fee 0.1%

Next best

  • db x-trackers iBoxx UK Gilt Inflation Linked (LU0321464223) OCF 0.2%
  • BlackRock Index Linked Gilt Tracker D (GB00B83RVT96) OCF 0.22%

Best retail class 

  • L&G All Stocks Index Linked Gilt Index Trust (GB0034155605) OCF 0.23%

International government bonds

Cheapest

  • BlackRock Overseas Government Bond Tracker D (GB00B849C803) OCF 0.17%

Next best

  • iShares Citigroup Global Government Bond ETF (IGLO) OCF 0.2%
  • iShares Barclays Capital Global Inflation-Linked Bond ETF (IGIL) OCF 0.25
  • Vanguard Global Bond Index (VIGBBD) OCF 0.25%, initial fee 0.2%

The Vanguard fund includes a large wedge of corporate bonds.

Best retail class 

  • BlackRock Overseas Government Bond Tracker A (GB00B66C4R68) OCF 0.47%

Corporate bonds

Cheapest

  • BlackRock Corporate Bond Tracker D (GB00B84DSW83) OCF 0.18%

Next best

  • BlackRock Overseas Corporate Bond Tracker D (GB00B58YKH53) OCF 0.18%
  • SPDR Barclays Capital Sterling Aggregate Bond ETF (IE00B3T8LK23) OCF 0.2% 3
  • iShares Markit iBoxx £ Corporate Bond ETF (SLXX) OCF 0.2%
  • Vanguard Global Bond Index (IE00B50W2R13) OCF 0.25% , initial fee 0.2%4

Best retail class 

  • BlackRock Corporate Bond Tracker A (GB00B66TQP96) OCF 0.48%
  • BlackRock Overseas Corporate Bond Tracker A (GB00B5M1ZD36) OCF 0.48%

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.

But what’s more striking to me in completing this selection is how little choice we still have in the UK.

For instance, I can buy four different shades of Canadian equity ETF yet only one for UK property. Weird and wonderful ETFs are popping up everywhere, yet important market categories like value are being roundly ignored here in Blighty, doubtless because they’re not fashionable.

Hopefully things will keep improving – I’ll keep an eye on the market and update this post periodically. Bear in mind the quoted OCFs may date, but this list should still prove an excellent starting point for your research.

And if anyone does come across any better index tracker options I’d love to hear about them.

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.

  1. The SWIP FTSE All Share Index Class B fund has an OCF of 0.09% but this is only available via Hargreaves Lansdown.
  2. You may wish to think twice about Amundi ETFs for three reasons. 1. They are synthetic. 2. They are domiciled in France and therefore subject to withholding tax. 3. They are denominated in Euros and therefore subject to currency risk.
  3. A UK total bond market ETF including gilts, corporate bonds and asset-backed debt.
  4. A total overseas bond market fund including government bonds, corporate bonds and asset-backed debt.

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