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Fund FAQs

Here we seek to address some frequently asked questions about funds.

If you're unable to find what you're looking for, please do not hesitate to phone us on 0117 900 9000 or email us.

Investing in funds

  • What is the difference between income and accumulation units?

    The type of unit you hold determines how any income generated from the fund's underlying investments is treated.

    With income units, income is paid out to fund holders as cash. This could provide the investor with an income stream or the cash could be reinvested to buy additional units.

    With accumulation units income is retained within the fund and reinvested, increasing the price of the units. Generally, for investors who wish to reinvest income, accumulation units offer a more convenient and cost-effective way of doing so.

  • What is the difference between 'inclusive' and 'unbundled' funds?

    In the past most investors who held funds, such as unit trusts and OEICs, paid a single ongoing charge to the manager of their chosen funds. This charge often included an element of commission which the fund manager shared with brokers, such as Hargreaves Lansdown, to help pay for their service. We call these funds 'inclusive' funds.

    FCA rule changes mean that when investors purchase a fund any commission must be rebated to the investor. As a result of these rules, fund management groups have launched new versions of their funds, often with lower ongoing charges, which do not include any commission. We call these funds 'unbundled' funds.

  • How do I buy funds?

    You can buy funds online, over the telephone or by post. Please ensure you have read the fund's Key Investor Information Document (KIID) or Key Features first which is available from the individual fund factsheets on the website.

    Online: If you're registered for online access, simply log in and select the relevant account, such as Vantage ISA or SIPP and click the ‘Deal Now’ button. Search for your chosen fund investment and continue to the confirmation page.

    If you're not already registered but have a Master Password, you can register for online access by selecting the ‘Register’ tab at the top right of the screen.

    Telephone: Provided you have a Master Password, you can call our stockbrokers on 0117 980 9800 Monday - Friday: 8am - 9pm.

    Post: Download a dealing form from our Useful forms section and return it to: Hargreaves Lansdown, One College Square South, Anchor Road, Bristol, BS1 5HL.

    Hargreaves Lansdown does not charge a dealing commission to buy or sell funds.

  • What is a fund?

    A fund is an investment that pools together the money from many individuals. Fund managers then use it to invest in a wide range of shares and/or bonds. Each investor is issued units, which represent a portion of the holdings of the fund.

  • Why invest in funds?

    Funds are popular with investors because they offer access to a ready-made investment portfolio run by an expert in their field. You can normally invest from £100 as a lump sum or £25 per month, and get instant access to a diversified portfolio for a much lower cost than purchasing the individual investments yourself.

  • How do I sell funds?

    You can sell funds online, over the telephone or by post.

    Online: If you're registered for online access, simply log in and select the relevant account in which the fund is held, such as Vantage ISA or SIPP. On the same row as the fund you wish to sell, click the green 'deal' button containing a white arrow, select the ‘sell’ option and follow the on-screen instructions.

    If you're not already registered but have a Master Password, you can register for online access by selecting the ‘Register’ tab at the top right of the screen.

    Telephone: Provided you have a Master Password, you can call our stockbrokers on 0117 980 9800 Monday - Friday: 8am - 9pm

    Post: Download a dealing form from our Useful forms section and return it to: Hargreaves Lansdown, One College Square South, Anchor Road, Bristol, BS1 5HL.

    Hargreaves Lansdown do not charge a dealing commission to buy or sell funds.

Fund pricing

  • I want to buy in to dips in the fund price, how can I do this?

    Timing fund deals to intra-day movements in the markets is notoriously difficult due to their forward pricing nature. One way to smooth entry points and benefit from pound cost averaging is to set up a regular savings instruction, whereby we automatically buy a set amount of a particular fund (or funds) each month.

    Please remember that your long-term investment objectives should always take priority over any short-term fluctuations in price.

    View more information on regular savings

  • The market was up yesterday, why is my fund down?

    Market performance is quoted open to close. A fund will usually price midday to midday. Therefore a day's market performance is unlikely to be reflected in a day's fund performance.

    In addition, unless you hold a fund that tracks the index, the underlying investments and weightings within the fund will be different to that of its benchmark index.
  • If I want to deal at today's price, when do I have to place the deal by?

    Providing the fund values at midday or later, deals for the same day's price will need to be placed by 8am online. If you are dealing over the telephone, we would need the order by 5pm the previous day. We may be able to place a deal on the same day for a midday or later valuing fund up to 9am, but this cannot be guaranteed.

  • How do I know what price I will get when I deal?

    The vast majority of funds price each working day at noon. When you place a deal it will be traded at the next available valuation point, typically noon the next working day. This means that you will not know the exact price that you will buy or sell at when you place the deal.

    You can however view the latest fund price on the fund factsheet. The price will always have a 'prices as at' date stamp to show when the price is from. Fund prices are updated overnight, and will display the last available price.

  • How does single pricing work?

    OEICs normally have one price for buying and selling, although some OEICs are priced in the same way as unit trusts. The initial charge is simply added to this single price when units are purchased. Again we typically offer savings on the initial charge so you pay a lower price than investors who buy with no saving. Where we offer a full saving on the initial charge, buyers simply pay the fund’s single price which is set by the fund manager.

  • How will I know what pricing structure a fund uses?

    The simplest way is to look at the quoted price for a fund. A dual priced fund will have a different selling and buying price. If the two prices are the same, the fund is a single priced fund. As a rule of thumb, most unit trusts are dual priced and most OEICs are single priced.

  • What is a dilution levy?

    Unusually high levels of buying and selling may increase the fund’s dealing costs and affect the value of its assets. In this situation, to protect the interests of existing investors the fund manager may apply a ‘dilution levy’ which increases the cost of buying and selling. This is typically between 0.5% and 2% of the trade, and the proceeds are held within the fund.

    Only a small number of funds have this charge levied; some funds only apply a dilution levy when there has been a particularly large inflow or outflow within the fund. The majority of funds allow for any charges to be absorbed by their own ongoing charge.

  • Why does the accumulation unit have a higher price than the income unit?

    Where a fund offers a choice between income and accumulation units, you will often see that the price of the accumulation units is higher. This is because any income received from the underlying holdings will be retained within the fund, where it is ‘rolled up’ over time and reflected in the value of the units on a daily basis. In contrast, income units are structured to pay out any dividends/distributions to the unit holders, whether on an annual, bi-annual, quarterly or monthly basis. It is therefore common to see the difference in the price of the income and accumulation units diverge over time.

  • Why do different fund classes have different prices?

    Different classes in a fund represent the different units the fund manager has created to suit certain types of buyers, for example, investors who use our Vantage platform or institutional investors such as pension funds and multi-manager funds. Each unit in the fund may have different costs and minimum investment levels. This can affect the performance of a particular class of the fund and is therefore reflected in the price.

    A different class may also indicate whether it is an inclusive or unbundled version of the fund, and whether it is an income paying unit or an accumulation unit. Each of these classes may have a different price to reflect the differences in their charging structure and the way they treat income received from the fund’s underlying holdings.

    There is no continuity across fund groups, class A for one fund is not necessarily the same as class A for another fund. 'A' is simply used to differentiate the fund from another unit of the same fund, class B or class Z for example.

    As the UK's leading investment platform, Hargreaves Lansdown is able to achieve significantly reduced charges across some of the funds we offer.

  • How are funds priced?

    Funds are priced based on the value of their underlying holdings. Most funds will calculate and publish a price every working day. There is no continuous pricing of fund units throughout the trading day.

    The vast majority of funds price each working day at noon. The pricing system means that when you place a deal it will be traded at the next available valuation point, typically noon the next working day. This means that you will not know the exact price that you will buy or sell at when you place the deal.

    To check when your funds value please see the valuation point on the key features tab of the fund's factsheet.

  • Which is better; single pricing or dual pricing?

    There is no definitive advantage to either type of pricing. Dual pricing provides an effective mechanism to protect against dilution. When investors buy and sell units, the fund managers have to cancel and create units accordingly. (Sometimes they will buy units from sellers themselves, known as box management). The action of creating and cancelling units to meet supply and demand (inflows and outflows of money) create costs. A dual priced fund provides a mechanism whereby this cost is borne by the buyer or seller that causes the cost. With a single priced unit, this cost is borne by the fund itself, therefore affecting all unit holders of the fund. This is known as dilution.

    Please remember that your long-term investment objectives should always take priority over any short-term fluctuations in price.

  • How are Hargreaves Lansdown able to secure these savings and discounts?

    Hargreaves Lansdown looks after over 876,000 clients. As the largest fund supermarket we are able to use considerable negotiating power to secure the best deals for our clients.

  • What is swing pricing?

    If there are a lot of investors either buying or selling en masse on a particular day, an investment fund will incur charges (such as commission for buying new holdings). Rather than taking the charges out of the fund (and potentially harming the value for the remaining investors) the FCA has given fund managers the option of 'swing pricing' - the fund can swing its valuation method from the mid price to the bid or offer price. This way, the fund can alter valuations to represent the true cost of producing or disposing of the extra units, in order to protect existing investors. We are unable to provide advanced notice of swing pricing.

  • How does dual pricing work?

    Most unit trusts are ‘dual-priced’ – they have an offer (or buying) price, and a bid (or selling) price. The difference between them is known as the bid-offer spread, and is made up of the initial charge, the difference between the buying and selling price of the underlying holdings, and other costs incurred by the fund (for example stockbroking commission and Stamp Duty).

    Normally, the prices are calculated as follows. The manager starts with the ‘creation’ price, which is the cost of creating a new unit. This includes the price of the underlying holdings which need to be purchased, plus all other dealing costs borne by the manager. The initial charge is added to the creation price to give the offer price, and the bid-offer spread subtracted from the offer price to give the bid price.

    Please note that even if we offer a full saving on the initial charge, this will only reduce the price paid to the creation price, and won’t entirely eliminate the bid-offer spread.

  • What are savings and discounts?

    We negotiate special terms with many fund management groups which allow us to offer savings on the initial charge and reduce the price you pay per unit. We have also negotiated terms which allow us to offer a lower ongoing charge on many funds.

  • How are the discounts applied to dual priced funds?
    We negotiate special terms with many fund management groups which allow us to offer savings on the initial charge and reduce the price you pay per unit. In many cases we are able to offer a full saving. Please note that even if we offer a full saving, this will only reduce the price paid to the creation price, and won’t entirely eliminate the bid-offer spread.
  • How are the discounts applied to single priced funds?

    Where we offer a full saving on the initial charge, buyers simply pay the fund’s single price which is set by the fund manager.

Charges for holding funds

  • What is the Minimum Cash Balance?

    We look at your holdings at the end of each month and suggest a balance (your Suggested Minimum Cash Balance) that should be sufficient to meet any fees or any other outgoings that may arise for the next few months. Please note that it would be impossible to predict your fees accurately in all circumstances. The value of funds will rise and fall (and therefore so will your fees) and any significant increase in the value of your holding during a month may mean you have to adjust the balance of cash you hold. However, it should prove a good guide in most cases.

  • What are the charges for investing in funds?

    Funds often levy an initial fee when you invest, up to 5.5%, and an ongoing charge, typically around 1%. Many brokers, including Hargreaves Lansdown, have negotiated savings on the initial charges for their clients.

    Search for a fund and see the savings we can offer

    We levy an administration charge to hold funds in the Vantage Service. Our charge is tiered within bands and will be 0.45% per annum on the first £250,000 of funds within each Vantage account, 0.25% per annum on the value of funds between £250,000 and £1m, 0.1% per annum on the value of funds between £1m and £2m, and no charge on the value of funds over £2m.

    The charge is based on the total value of funds (such as unit trusts and OEICs - not investment trusts or ETFs) held in each Vantage account. Please note these charges apply to each account separately.

    Fund fees are calculated based on the values of holdings on the last working day of the month.

    There is no charge to place fund deals online, by telephone or post. The charge for automatic reinvestment of income is 1%, with a minimum of £1 and a maximum of £10 per deal.

    Find out more about our charges

  • How do I find out the charges on the funds I own?

    You can find full details of the funds charges, including the the net ongoing charge (the ongoing charge for the fund less any saving offered by Hargreaves Lansdown), on the left-hand side of each fund factsheet.

    To find the charges for your particular fund, log in online and select the account in which your fund is held, such as Stocks and Shares ISA. Then select the name of your fund holding and this will take you directly to the factsheet.

    Alternatively, you can use this link to search for a fund. Once identified, please select the name of the fund and this will take you directly to the factsheet.

  • How are ongoing charges calculated?

    The ongoing charge is normally calculated and deducted from the fund on a daily basis. The fee deduction is reflected in the price of the units. This means that you will not see them shown on your statement and you do not need to pay for them separately.

Fund classes

  • What do the classes mean; Class 1, Class R, Class A etc?

    These abbreviations represent different units of the same fund which the fund manager has created to suit each type of buyer, such as investors who use our Vantage platform or institutional investors such as pension funds and multi-managers. Each unit in the fund may have different costs and also minimum investment levels.

    There is no continuity across fund groups, class A for one fund is not necessarily the same as class A for another fund. 'A' is simply used to differentiate the fund from another unit of the same fund, class B or class Z for example.

  • What is a fund conversion?

    In 2014 we started offering investors a new type of fund with lower annual management charges and lower or no loyalty bonuses. We call these 'unbundled' funds. We called the existing funds, with higher annual charges and higher loyalty bonuses, 'inclusive' funds. A conversion is the process of changing your fund holdings from 'inclusive' to 'unbundled' units.

    Some investors will prefer to convert to the new type of 'unbundled' funds, while others will prefer to continue to hold 'inclusive' funds. We give our clients the choice.

    You can compare the charges and savings of both unbundled and inclusive units.

    There are no charges to convert and HMRC has confirmed that conversions will not count as disposals for capital gains tax purposes. You will remain invested throughout the conversion process.

    Once you have given your instruction you can continue to trade in your inclusive fund, or cancel the conversion, at any time whilst your order is 'pending'. Once your instruction to convert has been passed to the fund group you will not be able to trade in the inclusive fund until the conversion is complete.

    You can convert a single fund, all funds in an account, or all funds in your portfolio.

    Find out more about converting funds

    Download our factsheet on fund conversions

  • What is an unbundled fund?

    FCA rules mean that any commission paid by funds purchased from 6 April 2014 must be rebated to the investor. As a result, fund management groups have launched new versions of their funds with lower annual management charges, which do not include any commission. We call these funds 'unbundled' funds.

  • What is an inclusive fund?

    In the past most investors who held funds, such as unit trusts and OEICs, paid a single ongoing charge to the manager of their chosen funds. This charge often included an element of commission which the fund manager shared with brokers, such as Hargreaves Lansdown, to help pay for their service. We call these funds 'inclusive' funds.

  • Can I buy unbundled funds cheaper if I go direct to the fund group?

    In the vast majority of cases, no. Using the Hargreaves Lansdown Vantage Service has many advantages including the choice of investments available, over 2,500 funds in one place, better prices and the benefits of combined buying power used on the investor's behalf.

    The Wealth 150+ is a list of funds that represent what we believe is the ultimate combination of first class management and low charges. The Wealth 150+ is a unique benefit to Hargreaves Lansdown clients – no other broker offers the same range of funds with the same low annual fund prices.

  • Why does Hargreaves Lansdown get the preferential low-cost ongoing charges for funds?

    We have taken advantage of a regulatory change in 2014, plus the fact that we are the UK's leading investment supermarket, to achieve significantly reduced fund charges for clients.

    Hargreaves Lansdown has used this change and the combined power of over 876,000 Vantage investors to negotiate even lower charges for our clients on many funds. The average ongoing charge of a Wealth 150 fund has fallen to 0.79%. In many cases these low charges are only available through the Vantage Service. This means they will be a unique benefit to Hargreaves Lansdown clients.

  • Why are the exclusive classes only available to HL clients?

    We have used the launch of unbundled funds in 2014, and the collective bargaining power of over 876,000 Vantage investors, to negotiate even better deals for our clients on many funds.

    The Wealth 150+ is the result, and these funds represent what we believe is the ultimate combination of first class management and low charges. The Wealth 150+ is a unique benefit to Hargreaves Lansdown clients - no other broker offers the same range of funds with the same low annual fund prices.

Income and dividends

  • What is equalisation?

    When you buy a fund between ex-dividend dates any income which has been generated, but not yet paid out, is included in the price you pay for each unit.

    Because of this, the first income payment you receive is made up of two separate parts. The first part is the income generated after you purchased the fund. The second part is the income which had been generated before you invested and included in the price you paid for each unit. As far as you are concerned this is not really income at all, it is a return of some of your initial investment, and your cost figure will be adjusted to reflect this return of capital. This is known as an 'equalisation' payment.

  • What is the historic/distribution/underlying yield?

    The historic yield is calculated by looking at the income the fund has paid over the last year and dividing it by the latest unit price.

    The distribution yield is an estimate of the income that may be expected to be received over the next twelve months divided by the current unit price and based on a snapshot of the portfolio on that day. It does not include any charges.

    The underlying yield is calculated in much the same way as the distribution yield, but also includes the effect of any deduction of expenses.

    As with all yields, this is an estimate of what investors could expect to receive; it is variable and not guaranteed.

    See our free Guide to Fund Prices, Savings & Yields below for a more detailed explanation.

Passive/trackers

  • What is stock lending?

    Some managers can lend the stock held by the fund to a third party in exchange for a fee. Tracker funds are ideally suited to this because there is often low turnover of their investments. In exchange for lending stock, the fund receives a fee which can help to offset some of the fund's management charges, reducing costs.

  • How often can I buy or sell my fund - is there a minimum investment period?

    There is no minimum period, but you can only buy or sell your tracker fund at its daily valuation point. Unlike shares which trade continuously during market hours, funds usually only value once a day. Dealing instructions have to be received before the valuation point so you will never know the price at which you will buy or sell a fund.

  • If the index goes up by 10%, will my fund grow by 10%?

    Not necessarily. Indices are often quoted without dividends whereas the tracker fund performance normally includes dividends. Tracker funds have management charges which are not incorporated in the index performance. Finally, the index performance is normally worked out as the performance at the close of market on a particular day, whereas most tracker funds are valued at midday. Over the long term, the fund performance should be very similar to that of the index, but in the short run they can deviate.

  • Can I take income from a tracker fund?

    Yes. Most tracker funds come as either income or accumulation units. With income units, income is paid out to fund holders as cash. This could provide the investor with an income stream or the cash could be reinvested to buy additional units. With accumulation units income is retained within the fund and reinvested, increasing the price of the units. Generally, for investors who wish to reinvest income, accumulation units offer a more convenient and cost-effective way of doing so.

  • What is a passive fund/tracker fund?

    An index tracker fund (also known as a passive fund) aims to track the performance of a particular index; such as the FTSE 100 or the FTSE All Share. They offer a convenient way to gain exposure to a broad range of shares or bonds at a low cost.

  • Can I hold tracker funds in my SIPP or ISA?

    Yes. Tracker funds can be used in an ISA, as part of a SIPP or they can be held as standalone investments in the Vantage Fund & Share Account.

  • What does it cost to buy and sell tracker funds?

    Often funds have an initial charge, which could be up to 5.25%. Hargreaves Lansdown, have negotiated savings on these charges. In most cases, you will pay no initial charge to buy a tracker fund through the Vantage Service. For some funds - primarily Vanguard's tracker funds - the fund manager has set a dilution levy which is applied when the fund is bought or sold. This dilution levy covers the manager's costs when placing investments and cannot be discounted.

    Find out more about our charges

  • How can I find a tracker fund covering a certain area?

    Tracker funds cover most major markets, but there are some areas which are not covered. This may be because the area is niche or companies would be costly to invest in (like the AIM market). Other passive investments, such as ETFs, cover a wider range of investments.

  • What does it cost to hold tracker funds?

    Tracker funds have annual charges which are calculated and deducted from the fund on a daily basis. In some cases Hargreaves Lansdown has negotiated substantially lower charges for these funds.

    There is also a charge to hold the fund in the Vantage service - which is no more than 0.45% p.a. of the value of your fund.

    Find out more about our charges

  • How are the investments managed?

    The job of the tracker fund is to follow the index and the manager will normally do this by buying the investments in the index, in the same proportions as the index. However the fund manager has some discretion over this process and may decide not to invest in certain holdings, for example if he feels that a company would be costly to buy whilst adding little to the fund's performance.

  • What areas do they cover?

    Tracker funds are available which invest in companies listed in most markets around the world. They are normally broken down by country or region, for example US equity or Emerging Market equity. There are also bond trackers, which hold bonds issued by governments or companies.

  • What is the difference between full and partial replication?

    A fully replicated tracker fund holds all the shares or bonds in its index. By using partial replication, a tracker fund aims to deliver the performance of the index without the cost of owning every single stock in the index. Full replication is more common in indices with a smaller number of holdings, or in bigger funds which have the scope to invest in a larger number of shares.

Fund literature