Funds

Investment Funds are various in structure that pool the money of retail and institutional investors into a wide range of permissible assets such as company shares, property, government and corporate debt. 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. Over time as your earnings grow and you have greater disposable income, you can increase your savings and benefit from long term compound returns.
• Your money buys units/shares in a fund, which invests in a diversified portfolio of underlying assets. For example, investing into a US equity fund would provide you with access to the shares of companies trading on the S&P 500.
• Investing via a fund spreads the investments therefore reducing the risk of investing in the stock market, as you are less affected by one or two companies underperforming than you would be if you held shares in just a handful of companies.
• Your money is professionally managed by capital allocators whose performance is subject to constant peer review.
• 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 asset 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. These are also typically held via an ISA.
• Investment trusts – run by fund managers, less widely sold than unit trusts and OEICs and generally higher risk. These can be held within an ISA.
• Exchange Traded Funds (ETFs) – are a type of index tracking security, which are priced throughout the day like shares. These differ from index-tracking funds, which have just one daily pricing point. These can be held within an ISA.
• Guaranteed funds – run by life insurance companies and fund managers, usually low risk as there is an underlying capital guarantee. Often funds with an underlying guarantee are derivative based and carry higher charges to meet those guarantees.
• With profit funds – typically managed by life insurance companies, generally low risk. Historically, With Profit funds were used as a mortgage repayment plan but replaced by ISAs for those individuals with interest only mortgages. With profit funds can be unitised with daily pricing or non-unitised.
• 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. These funds have significantly lower ongoing charges as there is no active management of the fund.
• 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 or theme e.g Sustainable Investments, Infrastructure.
  Invest in high yield fixed interest bonds for a high income.

Through our website you can buy over 5,500 investment funds on line adopting your own research or through Rosan Select, which offers a selection of our preferred funds.