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
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.
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.
You can buy funds online or over the telephone. 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 the HL 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, you can set up online access by selecting the ‘Register’ tab at the top right of the screen.
Telephone: Provided you have set up your security details, you can call our stockbrokers on 0117 980 9800 Monday - Friday: 8am - 9pm.
Hargreaves Lansdown does not charge a dealing commission to buy or sell funds.
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.
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.
You can sell funds with the HL app, on our website or over the phone.
We do not charge a dealing fee to sell funds.
HL app instructions
Log in and select the account with the funds you want to sell, for example your ISA or SIPP.
Swipe left on the relevant fund and select 'Deal'.
Select 'Sell' or, if you want to sell everything in this fund, select ‘Sell entire holding’.
Choose how much you want to sell. You can either sell an amount in pounds or a number of units.
Select 'Continue' and check the details.
Select 'Place Instruction'.
You can check the progress of your deal in the 'Pending orders' section of the account menu.
The money will appear in your account as soon as the fund manager has confirmed your deal.
HL website instructions
Log in and select the account with the funds you want to sell, for example your ISA or SIPP.
Select the sideways arrow button in the 'Actions' column on the relevant fund.
Select the 'Sell' option and choose how much you want to sell. You can:
sell your entire holding (all of your units)
sell a specific number of units
choose a value in pounds
Select 'Continue' and check the details.
Select 'Place a deal now'.
You can check the progress of your deal in the 'Pending orders' section of your account.
The money will show in your account as soon as the fund manager has confirmed your deal.
Over the phone
To sell your fund(s) over the phone, please call our Stockbrokers on 0117 980 9800 between 8am - 4:30pm UK time. You will need your account security information.
How fund prices work
Unlike share prices which change in seconds, most fund prices are set just once a day, by the fund manager. This is usually at noon each working day, though it can be early in the morning, late at night or even once a week, this is called the 'valuation point'.
This means that no matter when you place a fund deal, you can never know in advance the exact price you will get. You will always learn what price you got after your deal completes.
If your chosen fund's valuation point is at 12pm you need to place your deal by 8am to get the price that will be set today. Deals placed between 8am-9am may go through if trading volumes allow.
You can find out when funds are priced on the fund's detail page. Search for the fund on our funds page or in the HL app.
Fund deal timings
These timings apply to funds with a 12pm valuation point. If your chosen fund’s valuation point is not at 12pm you will need to contact our Helpdesk on 0117 980 9800 to find out what price you will receive.
Deal before 8am – your deal will be submitted for trading the same day. You will get the fund price from the same day.
Deal 8am – 9am – your deal will be submitted the same day if trading volumes allow. You might get the fund price from the same day.
Deal after 9am – your deal will submitted for trading the next (working) day. You will get e.g. tomorrow’s fund price.
If you are dealing over the phone, we would need the order by 5pm the previous day.
You can find out when funds are priced - their 'valuation point' - on the fund's factsheet. Search for the fund on our funds page or in the HL app.
Yes, we have a number of Islamic and Sharia compliant investments available through HL.
Fund pricing
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.
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 investing 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.
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.
Different classes in a fund represent the different units the fund manager has created to suit certain types of buyers, for example, investors with HL 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.
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.
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.
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.
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.
If you want your fund deal to go through in time for today's price, you will need to place it online by 8am. Deals placed between 8am-9am may go through if trading volumes allow.
Fund pricing
Unlike share prices which change in seconds, most fund prices are set once a day, at noon. Though some funds are priced early in the morning, late at night, or even once a week.
This means that no matter when you place a fund deal, you will never know the exact price you will get. You will only learn what price you got after your deal completes.
The time when a fund price is set is called its 'valuation point'. A fund’s valuation point can be found on its details page. You can find this by searching for the fund on our funds page or using the Search tool in the HL app.
Fund deal timings
Deal before 8am – your deal will submitted to the fund manager for trading the same day. You will get the price at the fund's next valuation point.
Deal 8am – 9am – your deal may be submitted the same day, if trading volumes allow. You might get the price at the fund's next valuation point.
Deal after 9am – your deal will submitted for trading the next (working) day. You will get e.g. tomorrow's fund price.
If you are dealing over the phone, we would need the order by 5pm the previous day.
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.
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.
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.
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.
Hargreaves Lansdown looks after over 2 million clients. As the largest fund supermarket we are able to use considerable negotiating power to secure the best deals for our clients.
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.
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.
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.
Charges for holding funds
Fund charges can eat away at performance and your returns, so it’s important to weigh up performance potential against the cost of investing in a particular fund.
If there are two funds offering the same performance potential, charges become a greater consideration – especially when looking at passive funds.
We’ve created a charge comparison to help you quickly see the relative cost of investing in a fund against similar funds in the same sector.
We break down each fund sector on our platform into funds with active and passive management.
We then order these sets of funds by their Ongoing Charges Figure (OCF) and score them.
There are five scores available, the lowest-charging get £, the highest-charging get £££££.
As an example, we divide funds in the UK All Companies IA sector into active and passive groups. We then order the funds in each group by the net charge paid by HL clients. We then give a £ to the cheapest 20%, ££ to the next 20% and so on.
Other considerations:
When we say ‘group’ below we mean: all passive/actively managed funds in their IA sector*
Where we’ve created sets of funds (e.g. the Wealth Shortlist) the charge comparison will still be based on a fund’s respective IA sector. You can filter by IA sector using our
A fund’s net OCF is compared against its group – this is the charge after any discounts so we’re comparing what you pay on our platform
Funds in groups with the same charge will be rated the same. In groups where lots of funds have the same charge, each rating of £-£££££ won’t necessarily have the same number of funds
If all funds in a group charge the same, they would all get a £££ rating (i.e. ‘average’)
If funds in a group split over two charges, they would be rated ££ and ££££ (i.e. lower or higher than average respectively)
If a group contains fewer than five funds, (or the fund sector is ‘unclassified’) we won’t apply a rating
Ratings are calculated for unbundled funds
Funds launched after 6 April 2014. FCA rules mean that any commission paid by funds purchased from this date must be rebated to the investor. As a result, fund management groups launched new versions of their funds with lower annual management charges, which do not include any commission.
only. This is the version of a fund available for new investors
Remember when investing with HL, our platform fee of up to 0.45% per year also applies.
*The Investment Association is the trade body and industry voice for UK-based investment management. The IA sectors divide the funds universe to reflect the asset type, industry sector, or geographic regions funds are invested in.
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 with HL. Our charge is tiered within bands and will be 0.45% per annum on the first £250,000 of funds within each HL 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 HL 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.
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.
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.
You can find full details of the funds charges, including 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.
Fund classes
These abbreviations represent different units of the same fund which the fund manager has created to suit each type of buyer, such as investors with HL 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.
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.
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.
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.
More than a million clients trust us to help them look after their money. We use that scale to negotiate lower fund charges for our clients.
In the vast majority of cases, no. Using the HL service has many advantages including the choice of investments available, over 2,500 funds in one place, and lower fund charges in many cases because of the benefits of our combined buying power used on our investors' behalf.
We’ve used the collective size and power of one million clients to negotiate some of the lowest fund charges across the industry on many funds.
Income and dividends
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.
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 reflects the amounts that may be expected to be distributed over the next 12 months, as a percentage of the unit price. It is based on a snapshot of the portfolio.
The underlying yield is the annualised income of the fund, net of expenses, as a percentage of the unit price. It is based on a snapshot of the portfolio.
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 and Yields for a more detailed explanation.
Dividends are income payments made by companies to shareholders and interest is income paid by companies or governments to their bond holders.
Funds will either make dividend distributions or interest distributions. If the fund predominantly holds shares, they will make a dividend payment. If the fund predominantly holds bonds, they will make an interest payment. You can establish how a fund makes distributions on the fund factsheet, available through the 'Fund prices & research' section of the website.
Passive/trackers
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.
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.
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.
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.
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.
Yes. Tracker funds can be used in an ISA, as part of a SIPP or they can be held as standalone investments in the HL Fund and Share Account.
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 our 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.
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.
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 HL service - which is no more than 0.45% p.a. of the value of your fund.
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.
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.
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.
Fund literature
After searching for your fund, click on the 'Key Features and Documents' tab.
For competitive reasons fund groups will only tend to publish the top 10 holdings from the underlying portfolio.
After searching for your fund, click on the 'Key Features and Documents' tab.
Yes, you must confirm that you have read the Key Features, Terms and Conditions and the Key Investor Information Document before placing a deal.
A KIID is a two-page overview of a fund's main features including objectives, risks, charges and past performance. It must be read and understood by an investor before buying a fund.