Adjusted performance
The funds' total return over the previous 180 weeks adjusted (see Technical Guide) for exposure to the FT Risk Profile it has been assigned. The adjustment could either increase or decrease the raw performance figure dependent on the level of risk. The Performance Rating compares a fund's performance relative to other funds within the same Risk Profile. Please note that the Performance Rating is based on a comparison only with other funds sharing the same Risk Profile. It does not show performance relative to all funds. The 180 week period was chosen as the balance between relevance and quantity of data.
Annual Management Charge (AMC)
Fund management companies levy an annual charge to cover the costs of administering the fund. This generally ranges between 0.5% and 2% of the total value of the fund and varies according to the size of the fund, the amount of money the Fund management company spends on research, administration and marketing. FT Fund Ratings' Charge Rating is based on a Total Expense Ratio (provided by Fitzrovia) which incorporates the AMC as well as other 'hidden' costs of owning the fund.
Association of Unit Trusts and Investment Funds (AUTIF)
The Association of Unit Trusts and Investment Funds (AUTIF) is the trade body representing the UK unit trust and investment funds (mutual funds) industry. It promotes investment in mutual funds such as unit trusts and open-ended investment companies (OEICs), including investment in mutual funds using ISAs. It also works on behalf of its members to lobby the government and liase with regulators. The AUTIF web site.
Charges
Fund Management Companies levy a range of charges on the funds they manage. Some are taken regularly while others are one off charges. Annual charges can include an Annual Management Charge for the ongoing management of the investment as well as additional fees for the administration and registration of the fund. It is also common for fund management companies to impose an initial charge for setting up the account but the fees are frequently heavily discounted. FT Fund Ratings' Charge Rating offers a comparison of annual costs, which includes management and administration fees, sales and transaction fees, brokerage costs and interest costs but excludes initial and exit charges. Because initial fees are variable because they are commonly discounted and because the relative importance of their impact varies with the lifetime of the investment they are not included. We do however encourage investors to consider these charges carefully before making an investment.
Charge Rating
The FT Charge Rating compares funds according to the level of a fund's total annual expenses charged to the fund (TER or Total Expense Ratio). The FT compares all funds' management and administration fees, sales and transaction fees, brokerage costs and interest costs. It is important to note that initial charges, exit charges and other 'one-off' fees are not included in our statistics. Initial charges are frequently discounted making them impossible to measure consistently. In addition the importance of the impact of one off charges depends upon the TER of a fund to measure the total charges borne by a fund in one year as a percentage of the fund's value. These charges are often less obvious and over the life of a long term investment can have an extremely significant impact. TERs are supplied by Fitzrovia PLC. The rating is calculated according to the following rules:
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Financial Services Authority (FSA)
The FSA is an independent organisation that regulates and monitors the financial services industry in the UK. It works on behalf of consumers to help protect their interests and educate about the benefits and risks of investment. The FSA has a web site at www.fsa.gov.uk which contains general information and guidelines as well as comparative information on some financial products.
Fund
A general name for a collective investment scheme that is divided into units or shares. Common types of funds in the UK are Investment Trusts, Unit Trusts and OEICS. Funds each have a fund manager who is employed by the fund to invest the money deposited in the fund on behalf of investors. In essence funds are a way for an individual to invest in a variety of assets, without having to select, buy or sell them individually.
Fund Manager
The Fund Manager is the individual within the Fund Management Company responsible for the investment decisions regarding the fund. The manager must adhere to the fund's stated investment objectives when making any investment decisions, although these objectives will vary between different funds.
Fund Management Company
The Fund Management Company is the group that is responsible for the investment capital held by the fund. They employ individual Fund Managers to make the decisions about which companies to invest the capital in.
Independent Financial Adviser (IFA)
An IFA is an independent financial adviser who searches through the financial services market for a product that suits your particular circumstances. IFAs are bound by law to provide impartial advice. They can advise you on which management company to choose as well as which fund. The IFA Promotion web site at www.ifap.org.uk can help you locate an IFA close to you.
Individual Savings Account (ISA)
A tax-exempt savings account launched in April 1999. ISAs have a wide choice of eligible investments, including foreign shares, cash and investment-based insurance products.
Initial charge
A charge to cover the costs of setting up an investment.
Investment Trust
A collective investment vehicle, similar in principle to a unit trust. However, because an investment trust is a quoted company in its own right, market sentiment means it may sometimes trade at either a premium or a discount to its true asset value.
Management charge
See Annual management charge.
OEIC (Open Ended Investment Companies)
An alternative to collective investment schemes such as unit trusts and investment trusts. Many UK fund management companies have already converted their trusts into OEICS.
Off-shore Funds
Funds not domiciled in the UK are often not treated as such for tax purposes - in some cases the Funds are recognised by the FSA but more commonly the Funds are either regulated by a regulatory authority in the jurisdiction in which they are domiciled or are unregulated.
Past Performance Rating
The FT Past Performance Rating shows a particular fund's performance over the past 3.5 years relative to other funds in the same FT Risk Profile. The rating provides a means of comparing which funds have done well in the past relative to other similar funds. Please note that the Performance Rating does not show performance relative to all funds, only to those within the same Risk Profile.
Personal Equity Plan (Pep)
A tax-efficient 'wrapper' for investments that shelters them from income tax and capital gains tax. PEPs were replaced by ISAs (Individual Savings Accounts) in 1999.
Portfolio
A collection of stocks, shares or other investments.
Return
The increase in the value of an investment over a particular period of time.
Risk
In the financial world risk means exposure to uncertainty. FT Risk Levels are based on volatility, a widely used measure of financial risk. Funds with high risk on this measure can generally be expected to make bigger swings in value than low risk funds - in either direction. When considering the trade off between risk and return it is important to remember that while high returns rarely come without taking risk or uncertainty, the opposite is not true - it is quite possible to take risks without being able to expect high returns.
Risk exposure
A measure of the extent to which the behaviour of a fund depends on the performance of certain market indicators. FT Fund Ratings measures risk exposures to various industries, geographical regions, economic indicators and fundamentals.
Risk Level
The Risk Level of a Risk Profile gives a broad indication of the likely volatility of funds assigned that Risk Profile. In general Risk Profiles with a higher Risk Level are more likely to vary between high and low performance. Volatility is a measure of the average weekly change in the price of the fund. Volatility is presented in units of annualised standard deviation:
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Risk Profile
The FT has assigned to each fund a Risk Profile. Funds that share a Risk Profile are exposed to similar risks and the profile gives an indication of the type of investment the fund is making. Funds most heavily exposed to a particular country or region are grouped together, as are funds most heavily exposed to a particular industry or investment strategy.
Total Expense Ratio
This is a percentage figure showing the proportion of a fund's assets consumed by all annual costs accrued by the fund. The Total Expense Ratio (TER) gives a more accurate annual figure than the standard annual charge. TER figures are provided by Fitzrovia PLC. We use TERs rather than the Reduction in Yield figures that are standard for calculations in the life assurance industry and are the figures used by the FSA in preparing its own comparative tables. The figures are similar in interpretation and are closely related but TERs are more widely accepted internationally and are available for a wider range of funds. They also do not depend on the highly variable initial charges
Uncategorised funds
Funds that FT Fund Rating does not have enough data to categorise. This is not a reflection on the fund, for example it may simply mean that the fund was launched recently and therefore does not have a long enough track record to gain a rating.
Unit trust
A mutual fund or collective investment that pools investors' cash and invests it on their behalf. Investors buy 'units', whose value is calculated each day in line with the value of the underlying assets. Unit trusts each have differing investment objectives.
UK Authorised Unit Trusts
See Unit Trusts (above).
Volatility
A share of a market's tendency to rise and fall rapidly and unpredictably in price.