Funds

Funds are investment vehicles that pool the money of many small investors into a range of shares or other assets. They can take the form of unit trusts, OEICs (Open Ended Investment Companies), investment trusts or offshore funds.

Why would I invest in a Fund?

The main advantages are:

• You can invest small amounts, from as little as £50 a month with no maximum investment.
• Your money buys a share in the fortunes of perhaps 30 to 100 companies, sometimes more.
• The wide spread of investments in a fund lowers the risk of investing in the stock market, as you are less affected by one or two companies doing badly than you would be if you held shares in just a handful of companies.
• You get professional management of your money.
• You can use funds to access riskier investment areas where buying individual shares is difficult, for example, in emerging markets.

Are there any drawbacks?

The main ones are:

• Costs – These vary depending on the type of fund and the channel through which you buy it. If funds are bought through leading platforms, costs can be significantly reduced and Rosan Helmsley has preferential charging arrangements through one of the UK’s leading platforms, owned and operated by Fidelity International.
• Choice – There are several types of fund with differing characteristics, and literally thousands of individual funds to choose from, making selection complicated if trying to identify a suitable fund on your own.

Types of Fund

These are the main types of fund you might come across.

• Unit trusts – run by fund managers, life insurance companies, banks and building societies. These are the most common investment for ISAs.
• Open-ended investment companies (OEICS) – a more modern version of unit trusts and available from the same range of institutions. OEICs benefit from single pricing structures, which means there are generally no spreads between the buying and selling price of units.
• Investment trusts – run by fund managers, less widely sold than unit trusts and OEICsand generally higher risk.
• Exchange Traded Funds (ETFs) – an import from the US available so far from a handful of investment managers.
• Guaranteed funds – run by life insurance companies and fund managers, usually low risk as there is an underlying capital guarantee.
• With profit funds – run by life insurance companies, generally low risk. Historically, this has been the underlying investment for many mortgage endowments and personal pensions.
• Unit linked funds – run by life insurance companies, similar to unit trusts but only available as investments for life insurance products such as pensions and investment bonds.

Investment Opportunities

Funds offer a huge range of investment opportunities. The basic distinction is between:

• Funds that track the movements of a stock market index or sector index (passive funds), and will do as well, or as badly as the market or sector;
• Funds where the investments are chosen by the managers (actively managed funds), who might invest mainly for growth, mainly for income, or a combination of the two.

Within these categories there are funds that:

• Invest only in the shares of UK companies;
• Invest mainly in the shares of European, North American, Far East or Japanese companies;
• Invest worldwide;
• Specialise in the shares of smaller companies, or in companies in a particular market sector, such as healthcare or technology;
• Follow a particular investment style;
• Invest in fixed interest bonds for a high income.

Through our website you can buy over 2,500 investment funds on line adopting your own research or through Rosan Select, which offers a selection of our preferred funds.