DIY Investor Magazine
/
March 2016
36
FUNDS – UNDERSTANDING THE FACT SHEET
The key document that allows investors to understand a
fund’s objectives, major holdings, investment strategy,
costs, historical performance and make a judgement
regarding its future prospects is its fact sheet.
Fact sheets are available on issuers’ websites, they can
be found on fund supermarkets and investment
platforms and the DIY investor could do well to spend
some time getting to grips with these important
documents so that they are able to objectively research
and compare and contrast funds they may be
considering.
The Key Investor Information Document (KIID) replaced
the Simplified Prospectus as part of the EU UCITs
IV directive in 2011 and was designed to be a simplified
and engaging document to enable the retail investor to
assess funds in a standardised format.
It is a requirement of the directive that KIIDs are
updated as often as is required to maintain their
accuracy and any material changes regarding
investment strategy and charges has to be updated as
soon as is reasonably practicable; it is therefore
advisable to periodically review fact sheets for the
products you hold.
The fact sheet will include the name of the portfolio
manager and a description of the fund’s objective –
capital growth, income or a combination of the two; it
will also show where the fund invests in terms of
industry sector, asset types and geography.
Sometimes the fact sheet will include market
commentary from the manager, including updates
on influences and events in the fund’s space or key
investments that the fund has made; a large number of
articles and videos in which fund managers set out their
stall can be found at
.
A key consideration for a would-be investor is whether
the fund looks to deliver capital growth or income;
this should indicate a fund that addresses your
particular requirement and which of its share classes
you may consider.
Funds that aim for capital growth tend to invest in
companies that do not pay dividends, whereas funds
that are looking to deliver income invest in more mature
businesses that are a more reliable source of dividend
income.
The fact sheet will usually show the top ten holdings in
the fund and the percentage of the overall fund they
represent and therefore how much the success or
otherwise of the funds depends upon them.
Holdings in the funds are broken down by geography,
asset type and industry sector which aid comparison,
particularly of global funds; it also declares the
proportion of the fund that is held in cash – a large
proportion may indicate a lack of certainty in the
strategy of the fund or concerns about the sphere
in which it operates.
A fact sheet will also show historical performance data,
usually over one, three and five years and this is
delivered as a ‘total return’ figure – the return you would
have received assuming you reinvested any income
back into the fund.
The fund’s annual performance is also presented in
comparison with other unit trusts and OEICs in its
A LARGE PROPORTION (OF CASH)MAY INDICATE A
LACK OF CERTAINTY IN THE STRATEGY OF THE FUND
OR CONCERNS ABOUT THE SPHERE IN WHICH IT
OPERATES
