What is a fund?
If you are new to the world of investing, then it’s worth explaining first what a fund is.
A fund is an investment scheme that pools the money that is saved in it and this money is then used to invest in a range of company shares, bonds or other assets.
You, as an investor in the fund, buy units or shares in it, depending on whether the fund is a ‘unit trust’ or an ‘open ended investment company (OEIC)’, which entitle you to a share in the overall performance of the fund.
Although there are technical differences between the two types of fund (unit trust and OEIC), they are identical from an investor's point of view.
What are the benefits of investing in funds?
The main benefits of investing in funds are that they
- can give you access to a broad range of investment opportunities and styles. For example, a fund may invest in an overseas market or company that may be difficult for you to invest in as an individual. We offer a market leading range of funds.
- can be held in a SIPP, ISA or junior ISA, allowing you to take advantage of the tax benefits that SIPPs and ISAs offer. You can also invest in funds through your dealing account.
- can help to reduce your exposure to the ups and downs of the stock market. Funds invest in a range of investment opportunities so if some of the companies (for example) are not performing as well, while the majority are, your savings may still continue to grow.
- are managed by specialist fund managers who are expert in their area. You effectively leave them to get on and make the most of your money, which means you don’t have to worry about spending your valuable time reading company reports or tracking the performance of individual companies – unless of course you want to!
What is a clean fund?
Funds typically have a charge associated with them, (levied by the fund manager), called the ‘Annual Management Charge’ or ‘AMC’. Previously, the AMC was made up of 3 elements, for example:
|Fund manager’s charge||0.75%|
|Platform or administrator’s fee||0.25%|
|Trail commission rebate||0.50%|
The final AMC you paid depended upon how much of the trail commission was rebated to you.
Following the introduction of the Retail Distribution Review (or RDR) by the Financial Conduct Authority (FCA) in 2013, most fund managers have introduced ‘clean’ share classes of their funds.
Clean funds are so called because the AMC no longer includes any platform fee or trail commission. With clean funds you will pay a lower AMC, typically 0.75%, and an explicit platform charge.
To give you transparency, you can only buy funds on our platform that are ‘clean’ funds. See our funds universe for details of all the funds we offer. You can invest in them through a SIPP, ISA, dealing account or junior ISA.
What are the charges for investing in funds?
We have a fund charge of 0.20% per annum (per account) for holding ‘clean’ funds. This is based on the value of the ‘clean’ funds in your account at the end of the quarter. It is capped at a maximum of £50 per calendar quarter (per account).
We make no explicit charge if you hold any funds that are not clean funds, but you will pay a higher AMC.
The charge for buying or selling any type of fund is £4.95 per deal, or you can place a regular investment instruction for only £1.50 per deal.
A full list of charges can be found in our charges and rates
I am an existing customer, how do I convert to clean funds?
Where you hold funds with a higher AMC you can convert your holding to a ‘clean’ equivalent, providing one has been issued by the fund manager and we have made it available on our website.
If you had a regular investment order in a fund with a higher AMC you can input a new regular investment instruction for the ‘clean’ equivalent, providing one has been issued by the fund manager.
We have created a Clean funds reference list which allows you to check whether there is a ‘clean’ equivalent available and whether it is available for regular investment.
Not all funds with a higher AMC have a ‘clean’ equivalent yet. We have taken care to ensure the Clean funds reference list is as accurate and as up to date as possible. Where no ‘clean’ fund is shown we will update these as and when we have confirmation from the respective fund managers.
If you would like to convert funds with a higher AMC to available new ‘clean’ equivalents please instruct us as follows:
- Send a Secure Message from your account with the subject ‘Fund conversion request’
- List the sedol and name of each fund you wish to convert from
- List the sedol and name of each fund that you wish to convert to
The sedols can be found on the Clean funds reference list.
We will process your request as soon possible, each conversion normally takes up to three weeks to complete, but may take longer depending on the fund manager involved.
Once we have accepted an instruction from you to convert a fund holding to a ‘clean’ fund you will not be able to sell that holding until the conversion is complete. The ‘clean’ fund will be added to your account once the conversion has completed, we will confirm this to you via a Secure Message.
Please note fund conversion requests are processed free of charge.
Can I transfer a fund that is not a clean fund to AJ Bell Youinvest?
Yes, but if there is a clean fund equivalent (shown on our Clean funds reference list) we will convert your holding to that clean fund equivalent, as soon as the transfer has completed. If there is no clean fund equivalent then we will hold the fund in its existing form, but will be entitled to convert it in future if a clean fund equivalent is created.
If you have any questions regarding your fund holdings, conversion or regular investment please call our Dealing Services Team on 0845 373 3479