What are funds? Find out the most frequently asked questions about investing in funds with Barclays Stockbrokers.
Questions and answers

Funds: Frequently Asked Questions

FAQ about Funds

FAQ about Stockbrokers

What is a fund?

A fund is a ‘collective investment vehicle’ that allows you to invest indirectly in equities, bonds, property or other types of assets. It's collective in the sense that your money is pooled with that of other investors. A fund manager runs the fund and selects the investments it holds in line with the fund objective.

Most funds offered to UK individual investors are open-ended, which means that a fund manager issues new shares or units when they get new money in, or cancels shares or units when investors take their money out. This means that the price of individual units is not usually affected by imbalances between investors wanting to buy or sell. The price of units should therefore typically reflect the value of the assets in the fund.

Why consider investing in funds?

  • Professional management – for actively managed funds, an experienced fund manager will make the investment decisions on your behalf. The managers and their teams have access to specialist research and analysis, which they use to make their investment decisions. This expertise allows them to potentially deliver results beyond what could be achieved by even the most active private investors.
  • Diversification – even if you only invest in one fund, your investment will be spread across a large number of underlying assets. This can lower your risk as your money isn’t concentrated in only a few individual shares. Therefore even if one of the fund’s holdings isn’t performing well, the overall fund could still generate positive returns.
  • Liquidity – you can buy or sell funds at short notice, usually daily and the fund. managers will continuously monitor the fund’s underlying investments to ensure this is possible.
  • Economies of scale – fund managers buy and sell investments in large quantities and any associated costs are shared by all the investors in the fund. This means the investing costs per individual investor are usually lower than if they were investing privately.
  • Convenience – funds allow you to invest indirectly in many underlying companies with just a single transaction. It’s also easier to monitor the performance of one fund rather than many individual investments.
  • Choice – there is a huge range of funds available. These invest in many different asset types and different economies around the world.
  • Access to foreign markets – fund managers are able to access shares on foreign stocks markets which may not be accessible to individual investors.
  • Flexibility – there are funds covering many asset types and global economies. This means you construct your entire portfolio with a selection of funds. Alternatively, you can use individual funds to invest in a specific market or type of asset.
  • Low cost – if you hold only funds in your ISA, SIPP or MarketMaster®, you won’t pay any account administration charges with Barclays Stockbrokers.  The Fund Administration Fee will apply to eligible fund holdings.

What do funds invest in?

Funds can invest in various types of assets in countries all around the world. These include equities, corporate and government bonds, property, derivatives and cash What your fund invests in depends on the specific investment objectives of the fund you have chosen. On a funds Key Investor Information Document (KIID) you will find the investment objective and information about the type of assets the fund manager intends to invest in and whether the fund focuses on a certain geographic region or business sector. A list of the top underlying assets a fund holds can be found on the individual fund factsheet which is available on our website.

Are some funds riskier than others?

Yes. This will depend on the fund’s investment objective and the underlying assets held within the fund as a result of the investment objective. You can find out more about the fund’s objective and risks on the fund factsheet and the accompanying Key Investor Information Document (KIID). Assets have different risk reward profiles; the general principal is that investments should provide higher profits if the chance of losing money is higher, as investors should be compensated for increased uncertainty. On each fund KIID there is a ranking between 1 and 7 which represent the risk reward profile of the fund. A ranking of 1 indicates the fund is of a lower risk profile and potential lower reward, and a value of 7 suggests a higher risk profile and typically therefore a higher reward. This ranking provides an indication of risk but is based on historical data which may change over time and may not be a reliable indication of the future.

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How do I choose the right fund for me?

You should consider your personal circumstances, including how long you want to invest for, as well as your investment goals and your attitude to risk. There are funds to meet almost any investment goal, investing in all kinds of companies in all kinds of economies around the world. To narrow down your search, you may want to look at:

    • fund sector
    • the fund's risk profile
    • past performance
    • fund charges

You should remember that past performance is not a guide to future performance.  The value of funds can fall as well as rise and you should be prepared to lose all or some of your money. If you are unsure what fund is suitable for you, seek independent advice. We do not offer advice.

How can I find out how well a fund has performed in the past?

You can find comprehensive fund performance data in our Funds Research centre and in the Key Investor Information Document (KIID). Fund managers recommend you usually hold a fund for at least three to five years. You should remember that past performance is not a guide to future performance.

What is the difference between unit trusts and Open-Ended Investment Companies (OEICs)?

Unit trusts and Open-Ended Investment Companies (OEICs) are the most common forms of collective investments. The main difference between them is their legal structure. Unit trusts are established as trusts and will issue units to investors, while OEICs are incorporated as a company and will issue shares. The value of the units in the case of a unit trust or shares in the case of an OEIC will then rise or fall based on the value of the underlying assets the fund holds. Both have independent parties who oversee their conduct; for unit trusts this is a Trustee and for OEICs it is a depository.

Traditionally OEICs have a single price which is the same for both buying and selling, while unit trusts normally have a buy price known as the offer price and a sell price know as the bid price. The offer price will be higher than the bid price and the difference reflects the initial charge for investing as well as the difference in cost between selling and buying the underlying assets the fund invests in. With OEICs you pay this initial charge separately.

What is the difference between income and accumulations units/shares?

Many funds offer investors a choice of either income or accumulation units. If you select income units you will receive any income generated by the underlying holdings.  Accumulation units/shares will instead increase in value if income is generated from the holdings as the income is kept within the fund.

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What are clean share class funds?

Clean share class funds are, lower cost funds available to investors. You can access these following the implementation of new rules set out in the Retail Distribution Review (RDR), an initiative by our regulator, the Financial Conduct Authority (FCA). The aim of the RDR is to give investors a more transparent view of how they are charged for certain products and services. The RDR affects all firms who provide services for retail investors to buy, sell and hold funds.

Fund managers charge an Annual Management Charge (AMC) for running the fund which they deduct from the value of the fund. Prior to the review this fee for managing the fund was typically around 1.5% per year for actively managed equity funds, and lower for passive or tracker funds. Fund managers generally paid part of this AMC to brokers and intermediaries (in this case Barclays Stockbrokers) for providing services associated with advice, distribution and administration of holdings in the funds. This part of the Annual Management Charge AMC is commonly referred to as a ‘trail commission’, ‘trail fee’, or sometimes a ‘Fund Manager rebate’.

The FCA decided that investors should be given a clearer view of how much they pay fund managers for their services and how much they pay investment service providers, such as Barclays Stockbrokers, for theirs. Therefore now when you invest in funds through Barclays you will usually pay a lower AMC to the fund manager and a separate Fund Administration Fee to Barclays Stockbrokers. This fee is charged at 0.35% per year on the first £500,000 of funds in your account, with a minimum of £35 per year. Investors using the Regular Investment Service won’t have to pay the £35 minimum fund administration fee, keeping investment costs low.

Although you’ll pay two charges, we expect most clients will generally pay less. Prior to the RDR the typical AMC for a fund was 1.5%. While the new clean share classes on the Barclays Stockbrokers Funds Market will have an average AMC of 0.68%, if you add the fund administration fee of 0.35% this comes to 1.03% which is lower than the typical AMC of 1.5% that prevailed before. In order to ensure that clients benefit from the changes as soon as possible, we have been converting any existing funds held with us into clean share classes, where available during 2014.

Can I hold any fund in my ISA?

Most funds can be held in an ISA. However HM Revenue & Customs (HMRC) regulations mean there are some which are not permitted.  When researching funds on our Fund Search you can select to only look at funds which are ISA eligible.

Do funds pay out income?

Yes they can. Income is paid out as cash if you hold or income units, also known as distribution units. If you hold accumulation units these will increase in value as the income is retained within the fund. The income from funds can fall as well as rise and returns are not guaranteed.

What charges are involved in investing in funds?

Fees charged by the Fund Manager

When buying funds you can incur one off entry or exit charges however when you buy funds on our Funds Market you avoid any initial charges or dealing commissions. The initial fee varies by fund manager and fund but this can typically save you up between 3-5.5%.  However if you buy funds which are not part of our Funds Market you may incur initial charges on purchases.

The Ongoing Charges Figure (OCF) of the fund includes the cost of running the fund and the fund managers Annual Management Charge (AMC). The AMC is the fee investors pay to the manager for their expertise in managing the investments, this fee is calculated on a daily basis and factored into the price of the fund.

Some funds will then also charge a performance fee. This fee is only taken if they deliver a return to investors above a specified performance target. The (Key Investor Information Document) KIID will state all the potential charges associated with a fund. You must confirm you have read this document before investing in any fund.

Fees Charged by Barclays Stockbrokers

Barclays Stockbrokers charge a fee for the administration of your investments. The Fund Administration Fee is 0.35% per year subject to a minimum charge of £35 per year per account. The fee is calculated on the daily value of eligible fund holdings, up to a maximum of £500,000. There is no further charge on fund holdings over £500,000.

You do not pay the general account administration charge on an ISA, SIPP or MarketMaster® accounts when you hold only funds in your account.

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When I purchase or sell a fund can I set a price limit?

No. Funds are usually valued once a day and trade on a ‘forward price’ basis.  Fund managers calculate the total value of the investments held, deduct any charges and divide this by the number of units/shares issued in order to determine the fund’s price each day. When you place a buy or sell order, the instruction is processed by the fund managers at the next valuation price, which won’t yet be known. Therefore you will not know the exact price at which you will buy or sell a fund.

What is a Key Investor Information Document (KIID)?

The Key Investor Information Document (KIID) is a brief document which tells you about the key features and risks of the fund or ETF that you are investing into.

For Undertakings for Collective Investment in Transferable Securities (UCITS) funds, the document replaces the Simplified Prospectus which fund managers previously published for their funds.

Do I need to have read the Key Investor Information Document (KIID) before I purchase a fund?

We will ask you if you have accessed and read the KIID before placing each purchase. The KIID is located on the fund factsheet in the Research Centre.

In addition, if this is the first time you have traded in an ETF you will be asked to complete an Appropriateness Assessment questionnaire before you are able to place your investment instruction.

Is the price for funds up to date?

Funds are usually valued once a day and therefore trade on a ‘forward price’ basis.  Fund managers calculate the total value of the investments held, deduct any charges and divide this by the number of units/shares issued in order to determine the funds price each day. When you place a buy or sell order, the instruction is processed by the fund manager’s next valuation price, which won’t yet be known. Therefore you will not know the exact price at which you will buy or sell a fund. This price is generally then published overnight so the price shown for a fund usually relates to the previous day’s valuation.

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What is the settlement period for funds?

Fund settlement is variable and is normally between 2 and 5 working days from the valuation point. When you place your deal online we will give you an indication of the expected settlement date. We will send you a contract note confirming the deal details once we have received confirmation from the fund manager.

With regards to funds, what is our Disclosure of Inducements?

If you hold bundled share class funds purchased prior to April 2014 we may receive trail commission from the fund manager.

This payment from the fund manager to Barclays Stockbrokers will stop if your fund is converted to a clean share class. Once converted the Fund Administration Fee will apply.

The Fund Administration Fee will apply to all fund holdings from 6 April 2016.

To find out more information on our Disclosure of Inducements for Funds, please view our Disclosures.

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FAQ about Barclays Stockbrokers

Why should I choose to invest in funds through Barclays Stockbrokers?

Barclays Stockbrokers give you instant access to a range of comprehensive research and information services through our website.

You will pay no initial charges or dealing commission when investing in funds on the Barclays Stockbrokers Funds Market. You pay no account administration charge on an ISA, SIPP or MarketMaster® when you hold only funds in your account, however a Fund Administration Fee is payable on ‘clean share class’ fund holdings.

What is the Barclays Stockbrokers Funds Market?

Barclays Stockbrokers Funds Market is a selection of more than 2,000 lower cost ‘clean share class’ funds from more than 100 leading fund managers. You can place an order in any Funds Market fund online or by telephone from a minimum of £50.

You pay no initial charges or dealing commission on any deal in funds on our Funds Market.

What type of funds can I buy through Barclays Stockbrokers?

Through our Funds Market you can choose from more than 2,000 lower cost ‘clean share class’ funds.  These are mostly UK-based unit trusts or OEICs, but we also offer a number of funds registered in Luxembourg and the Republic of Ireland.  We may also be able to purchase other funds not included in our main Funds Market – please call us to enquire.

Can I buy funds through any Barclays Stockbrokers account?

Yes, you can buy and hold funds through any of our accounts. For certain accounts such as ISAs there may be HMRC restrictions on which funds you can buy. When using our funds factsheet search you can filter by ISA eligibility.
Barclays Stockbrokers Funds Market funds are available for both online and telephone trading. Other funds are available to buy and sell only by telephone.

What is the minimum and maximum I can invest in a fund through Barclays?

We have reduced the minimum online investment for funds in our Funds Market to £50.
Our online fund factsheets show the fund manager's official investment figures which may be very large, but for Funds Market funds these levels do not apply.. There is not normally a maximum amount you can invest into a fund.

What happens when I place a funds order?

As soon as you have placed a funds order, if you have the ‘Available to Invest' facility, this amount and ‘Holdings' will be adjusted and you will not be able to use either the cash or the units in future orders until your deal is carried out.

Fund orders will be carried out at the next appropriate valuation point, the expected valuation point will be indicated online when you place your order, and will settle normally between 2 and 5 working days from the valuation point.

At any time after you have placed a fund order you will be able to check its progress by accessing the ‘Order Status' area of the website. A contract note will be posted to you following the successful dealing of your funds order. A record of your deal will also be accessible in the ‘Deal History' area of the website.

Due to fund settlement processes, you cannot sell a fund purchase until your deal has fully settled.

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Can I transfer my existing fund holdings into a Barclays Stockbrokers account?

Yes. You can transfer fund holdings held with other providers or fund managers to your Barclays Stockbrokers account.  Find out more.

What is the Regular Investment Service?

The Barclays Stockbrokers Regular Investment Service offers you the opportunity to make regular monthly investment instructions into a select range of funds available on the Barclays Stockbrokers Funds Market. We allow up to 10 Regular Investment instructions per account. See ‘How do I set up a Regular Investment?’

How do I set up a Regular Investment?

To set up a Regular Investment it couldn’t be easier, you simply have to give us the following information:

a)    Which fund(s) you want to invest into
b)    How much you want to invest every month (min £50, max £1,000 per fund)
c)    Whether you want your investment(s) placed on the 2nd or 4th Wednesday of the month.

You can give us the above instructions by calling us on 0800 279 6551* or 0141 352 3909*, or completing the Regular Investment Instruction Form [PDF, 261KB] and returning it to the address noted at the top of the form.

How do I pay for my Regular Investment service?

Please ensure your Barclays Stockbrokers account has sufficient cleared funds available by 10am the day before the relevant dealing day in order for us to carry out your Regular Investment.

Money can be added to your account either by setting up a regular Direct Debit Instruction [PDF, 210KB] or by Debit Card. If using Direct Debit, please ensure you leave sufficient time to have the money clear on your Barclays Stockbrokers account.

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How do I cancel my Regular Investment Instruction?

To cancel your instruction you need to call our contact centre on 0800 279 6551* or 0141 352 3909* and notify us of the Regular Investment you wish to cancel.

Can I choose to buy a fixed number of units or shares?

For MarketMaster® accounts you can invest either a cash amount or buy a specific number of units or shares.

For ISA and SIPP accounts you must place your investment only as a cash amount. Funds are ‘forward priced’ meaning that trades are not done at the current price, but at the next quoted price and therefore the price of each unit is not known until after your order has been placed. Therefore by placing the order as a cash amount we can ensure that your order will not breach your total cash investment limit for the account. This is in line with HM Revenue & Customs (HMRC) requirements for ISA and SIPP accounts.

How can I monitor the performance of my fund investments?

You can check your account online by visiting the Account View section of our website. We will also send you regular statements and valuations. Our funds research centre also has comprehensive data on all UK funds and their performance.

*Lines are open 7.30am to 8.30pm Monday to Thursday, 7.30am to 6.00pm Friday and 9.00am to 12:30pm Saturday (excluding Bank Holidays). Call costs may vary - please check with your telecoms provider. Calls may be recorded so that we can monitor the quality of our service and for security purposes.

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