Fund factsheets are available to view on fund manager websites as well as online fund supermarkets. Fund factsheets are a very important tool to fully utilise when buying or reviewing a portfolio. Typically they will often contain the name of the fund manager and a brief description of where the fund invests as well as commentary from the fund manager on key trend related to the performance of the fund. Here are some other aspects that investors should look out for:
Size of fund
A large fund is usually equated with £1bn or more assets under management. However, just because a fund is larger is than another, this does not mean that it is more successful or performing well. This is why an investor needs to consider other aspects.
Income seeking investors should look for the historic yield percentage, and this is usually provided on a historic basis over the past 12 months.
Top 10 holdings, industry sector and geographical breakdown
The top 10 holdings as well as industry sector breakdown give an insight into the nature of the fund and specific equities or assets it is invested in. Similarly, the geographical breakdown of where the fund is invested in by location is useful for investors to understand the exposure that the fund has to different markets around the world. The combination of these three elements are useful to understand, particular if an investor is looking to diversify or re-balance their portfolio.
One of the most interesting figures for investors here will be how much the fund holds in cash. Too much cash held (e.g. over 5%) within a fund suggests that the fund manager is nervous about the market ahead and is therefore sitting on cash rather than deploying it.
A fund fact sheet will also tell an investor how a fund has performed over the years. Fund fact sheets tend to show the total return figure of a fund, this is the return an investor would get from re-investing the income from a fund back into it. The performance is typically shown historically; since launch, 1 year, 3 year and 5 year.
While a fund may have good historical performance, it is important to understand this in relation to the sector average or relevant stock market index. Imagine a fund has grown 50 percent over 3 years, this may look good on paper. But suppose the sector average has returned 70 percent over 3 years, suddenly the performance of the fund does not look so promising.