An actively managed investment fund is one where your money is invested in a portfolio of assets selected by a professional fund manager. Each fund manager constantly monitors companies, economic conditions and markets, and decides where it’s best to invest to meet the investment fund's objectives.
Is the process of deciding what proportion of an investment portfolio should be invested in different types of investments (for instance, shares or bonds), in what markets (what regions and countries) and in what sectors.
There are four main categories of asset class for investment funds:
Cash - The least risky of the four asset classes but the risk is often accompanied by modest returns on investment.
Shares/Equities - Shares issued by a company normally listed on a stock exchange. Individuals who buy shares hold a share in that company and are entitled to dividend payments and voting rights.
Corporate bonds or fixed interest investments - Are loans to companies or governments. They usually pay an agreed level of interest each year and aim to pay back the capital at the end of a stated period. There are different types of bonds and each type has a different level of investment risk determined by a credit rating system. A ‘risky’ or ‘sub-investment grade’ bond has a lower rating than an investment grade bond. The lower the rating, the riskier the bond.
Property - Commercial property such as shops, office blocks, retail parks and warehouses.
The spread is the difference between the buying and selling price of units on any day. The spread is made up of two parts:
An allowance for the difference in the buying and selling price of all the investments held within the fund. This spread includes any stamp duty and stockbroker fees. The size of this part of the spread mainly depends on the type of investments held. The spread tends to be larger for funds investing in smaller companies, emerging markets, commercial property and higher risk corporate bonds.
You can now invest your full ISA allowance, currently £15,240 in a cash ISA this tax year. Alternatively, you can now invest up to £15,240 in a stocks and shares ISA, or £15,240 in a combination of both.
The Financial Conduct Authority requires companies like us to send confirmation of customer transactions every six months. With many of our customers' transactions, for example lump sum investments or withdrawals, they receive a Contract Note and will also be notified of these transactions in their annual statement. However, for some transactions such as regular investments, the customer doesn’t receive a Contract Note every time the regular investment is made. Instead, the confirmation of those transactions is consolidated and provided twice a year.
Corporate bonds are a type of fixed interest security. When you invest into a corporate bond fund, instead of 'lending' money to a bank - which is effectively what happens when you place money on deposit - we lend your money to companies who agree to pay an agreed level of interest over a certain period of time.
Some investment funds can use investments known as derivatives. Their name reflects the fact that their price is derived from a change in value of the investment that they're linked to, such as shares, property or bonds. Experienced managers use derivatives as part of an investment strategy to manage the effect of possible market falls or changes in exchange rates. This reduces the cost of investing in assets and helps to manage cash flow.
For some investment funds, derivatives will be used to seek to enhance overall investment returns, manage risk and to help protect returns from market falls. This includes investing in derivatives whose value rises when the market falls, but whose value falls if the market rises.
If you invest in a unit trust in your name for the benefit of someone else, such as a child or grandchild, then the investment is still yours. You'll pay whatever taxes you would normally pay on it. It’s possible for you to 'designate' the investment in the name of the other person as a way of identifying that the investment has been made for that person.
Where a provider quotes an annual management charge (AMC), they will typically quote extra expenses (or something similar). These are expenses not quoted in the AMC, such as auditors, trustees, custodian, registrar and regulator fees, which are paid out of the fund.
A fixed interest security is a way of 'lending' money to a government, or to a company, in return for an agreed level of interest over a set period. This type of investment is intended to provide a regular, reliable income.
A person professionally qualified to manage funds to meet financial goals for the benefit of the investor(s). A fund manager will make the decisions about which assets to invest in and is responsible for the day-to-day management of the fund.
This is where any income earned by the investment fund is paid direct to your bank or building society account, and isn't reinvested into the investment fund. If you choose to receive an income you’ll receive ‘distribution units’.
This is where any income earned is reinvested back into the fund. This increases the value of the investment fund. For most investment funds, if you choose to reinvest your income, you’ll receive ‘accumulation units’.
Index-tracker investment funds invest in most or all of the same shares, and in a similar proportion, as the index they are tracking, for example the FTSE 100 Index. Index-tracker funds aim to produce a return in line with a particular market or sector, for example, Europe or technology. They are also sometimes known as 'tracker funds' or ‘passive funds’.
ISA stands for Individual Savings Account. An ISA is simply a ‘tax-wrapper’ around a product, for example, a unit trust, that makes it tax-efficient. You can invest in a cash ISA and/or a stocks and shares ISA. The tax advantages of ISAs may not be maintained and the value of current tax benefits depends on individual circumstances.
Is a Thomson Reuters company and a global leader in supplying fund information, analytical tools, and commentary. Lipper is recognised as one of the industry standard providers of benchmarks and classifications for asset managers, fund companies and financial intermediaries.
An investor can choose to make regular monthly contributions into a fund or pay a larger amount as a lump sum. Lump sum payments are often one-off payments, with an initial minimum investment amount of £500 for ISA or unit trust investments.The maximum lump sum investment for a stocks and shares ISA this tax year is currently £15,240. There is no maximum lump sum investment for unit trusts, although you can invest a maximum of £100,000 online.
An investor can choose to make monthly contributions to their chosen investment fund, known as regular investing. The minimum monthly contribution is £50 for ISA or unit trust investments. There is no maximum monthly contribution for unit trusts.
Multi Manager investment funds allow you to invest in several funds at the same time through one simple investment. Professional fund managers select, monitor and change the underlying funds based on set criteria, for example, the investment quality and investment objective of the providers. Each multi manager investment fund holds a mix of funds covering many different types of asset, industry sectors and markets.
The funds may also be sourced from more than one provider. For example, our Multi Manager investment funds may invest in funds managed by well-known and respected companies such as Invesco Perpetual, Schroders, M&G, as well as in our own funds.
Our online account management service. It allows you to manage your investment or pension online. You can change your contributions, switch funds or simply check up on your investment funds whenever it suits you. Register here.
OEICS are similar to unit trusts, but are established as companies that issue shares to investors. Often, OEICS are made up of a series of sub-funds. Each sub-fund has its own investment objective. The value of each sub-fund, and each share price, is usually calculated on a daily basis.
A holding of investment funds. This could be split across ISA and unit trust investments. A balanced portfolio is made up of a number of different types of assets such as cash, shares, corporate bonds and property.
All investment funds have risk factors and some have higher overall risk ratings than others. Higher-risk investment funds offer the potential for higher returns but carry with them an increased risk of not getting back all the money you initially invested. The lowest risk type of investment is cash.
Shares are sold by companies to raise money. If the company is a Public Limited Company or Plc, its shares will be available to purchase on the stock exchange. Shareholders are entitled to a share of company profits, usually paid as dividends, and have the right to vote on major decisions. (Also, see Open-Ended Investment Companies (OEICs)).
As the name suggests, a stock exchange is where stocks and shares in companies can be bought and sold. The Financial Times Stock Exchange 100 Index (FTSE 100) lists the 100 largest companies on the London Stock Exchange. These companies are the largest in terms of market capitalisation, the total value of the shares issued by the company. See also FTSE.
Switching is when you change your fund choice. You can make a switch at any time and this service is currently free of charge. You can switch online if you’re registered with My Account. If you decide to switch into a unit class with an initial charge, the initial charge may be taken.
Dividend payments are made to shareholders from a company's profit. The amount of payment is decided by the company directors and cannot be guaranteed. Some unit trusts pay their income in the form of ‘UK dividends’.
A ‘wrapper’ is designed to go around an investment to make it tax-efficient. For example, an ISA is a wrapper that allows you to invest in a unit trust without having to pay personal income or capital gains tax.
Funds paying a dividend distribution have a Historic Yield.
The Historic Yield reflects distributions declared over the past 12 months. It does not include any initial charge and investors may be subject to tax on their distribution.
Funds paying an interest distribution have a Distribution Yield and an Underlying Yield.
The Distribution Yield reflects the amounts that may be expected to be distributed over the next 12 months. It is based on a snapshot of the portfolio. It does not include any initial charge and investors may be subject to tax on distributions.
The Underlying Yield reflects the annualised income net of expenses of the fund. It is a snapshot of the portfolio. It does not include any initial charge and investors may be subject to tax on distributions.
If the Distribution Yield is higher than the Underlying Yield this is either because the fund distributes coupon income and/or a portion of the fund's expenses are taken from capital. This has the effect of increasing distributions and constraining the fund's capital performance.