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Funds - the basics

If you want to know more about funds before you invest, watch our short video for a quick overview, or read more below.

What is a fund?

An investment fund is made up of a collection or group of different investments managed by a fund manager. The money you invest is put together with the money from other investors and used to buy a range of assets such as equities (shares), bonds and property.

When you invest in a fund through a Stocks and Shares ISA or a Trading Account you can invest into a unit trust or an OEIC (open-ended investment company).

Unit trusts

Each fund is split into equal parts, called units, this is known as a unit trust. You can then buy and sell the individual units in that fund. The number of units held is multiplied by the unit price to determine the value of investors’ holdings in the fund.

OEICs (Open-ended investment company)

Here the fund is structured as a company. When you invest you buy a share of that company.

Trading of units / shares

As the value of the assets in a fund changes over time, the unit or share price fluctuates. This is what makes the value of your investment rise or fall. When you want to take the value of your investment out of the fund, your units or shares are sold back to the fund manager at the price on that day.

The information provided here should not be regarded as financial advice.  If you are unsure we recommend you speak to a financial adviser.  You can find one at


What assets are held in a fund?

There are 4 main asset classes:

Money market instruments (including cash)

Money market instruments provide governments and corporations with short-term access to capital. They include certificates of deposit, treasury bills, commercial papers and bankers' acceptances.

Bonds / fixed interest

Bonds or fixed interest investments are loans issued as a way of borrowing money. They can be issued by governments (known as gilts when issued by the UK Government), companies and local authorities. Bonds pay an income, usually at regular periods of time, for the length of the loan. Bonds are traded on markets which means their value will vary. At the end of the loan period, their original value is repaid.


This includes direct investments in commercial property such as office, retail, leisure and industrial developments, as well as indirect investments such as shares in property companies.

Equities / shares

A share in the ownership of a company often referred to as 'shares' or 'stocks'.


Each fund will hold several investments. Depending on the fund's objective this could be in a single asset class or multiple asset classes. Where the fund holds more than one asset class the split between the asset classes is known as the fund's asset allocation. Each asset class generally has a different level of risk. For example, money market instruments are typically considered to be less risky than equities.

Why diversify?

When investing, you'll often hear about the potential benefits of diversification. Rather than investing all your money in one place you can spread your risk by investing in a mix of different assets, so that potential losses in one asset class could be offset by potential gains in another.

A diversified portfolio could be invested across a range of different asset classes such as equities (shares), fixed interest, property and money market instruments and should be created depending on your attitude to taking risk and your capacity for dealing with any losses.

Role of the fund manager

The fund manager’s job is to make decisions in line with the aims and objectives of the fund. This means they’re responsible for day-to-day decisions about the fund, such as responding to market changes and the long-term decisions such as how and where the fund invests.

What do funds cost?

When you invest in funds you might face the below charges:

Fund manager’s annual management charge

An annual management charge is an ongoing charge. It’s made by the fund manager for managing the investment of a fund and will vary between funds.

Ongoing Charges Figure (OCF)

The fund’s OCF combines the fund’s annual management charge with any additional fees and expenses incurred from the fund’s day-to-day administration.

Entry and exit charges

This can be to cover the administrative costs involved when an investor buys or sells units in a fund. An entry charge may also be issued when units are purchased to offset any potential effect on the value of the fund (known as a pre-set dilution levy).

All of the charges are laid out in the Key Investor Information Documents (KIIDs) and Fund factsheets found next to each fund in the fund selection tables.


For more information on our charges take a look at our crystal clear price promise.

Investment help

We can help you make your own investment decisions:

Understanding investment risk

Before investing you need to decide the amount of risk you're willing to take with your money and your capacity to deal with any losses.

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By using the ISA calculator you will get an indication of how much a Stocks and Shares ISA might be worth in the future.

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