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8 View commentsWhen I try to research the investment funds mentioned on your site, I often discover there are half a dozen or more versions of the same fund listed on the performance tables.
A fund name is followed with abbreviations like Acc, Inc, No Trail, R, I, and Z at the end - and sometimes a combination of them.
What do these all mean? How do I know which version of a fund I want to buy? Anon
Confused? A fund name is followed with abbreviations like Acc, Inc, No Trail, R, I, and Z - what do they mean?
Tanya Jefferies of This Is Money replies: The different abbreviations tagged on the end of fund names leave many investors baffled.
Only some of them are standardised and common across the industry. The rest are apparently random letters, added at the whim of individual fund firms, which presumably mean something to them but are impenetrable to outsiders.
More...
- Clean funds guide: Is it time to put your dingy old funds through the wash?
- How to find clean funds: We list 30 top-sellers and explain how to find the rest
As a result, the letter 'C' on the end of a name might mean one thing on one fund, and quite another on a different fund from a different firm, and it requires further investigation to find out.
Using such confusing names for products that are on sale to the paying public seems an archaic way of going about things in the modern, consumer-friendly world. You shouldn't have to learn the investing industry equivalent of the Enigma code just to tell one fund from another.
Nevertheless, names recently got even more complicated after the arrival of a new class of 'clean funds'.
These were created due to a ban by regulators on backdoor commission payments from fund firms to brokers and financial advisers, under a shake-up officially known as the Retail Distribution Review or RDR.
Clean funds are simply versions of existing investment funds that include no fees for middlemen, just the basic fee levied by the fund manager. As they have most fees stripped out - or 'unbundled', in the industry jargon - even after admin charges are added back in again they offer the opportunity for higher returns over time. Read our clean funds guide.
Investors have good reason to seek out clean funds since they are often cheaper, but there's no way to identify them at a glance.
Instead of using 'clean fund', or 'C' or some other universal word, letter or code as a label for these new products, fund providers have all gone their own way and given them different names, making it hard to tell them apart from the old kind.
Despite these difficulties, there are a variety of ways to find out what fund names mean and which version of a fund best suits your needs.
This is Money has got a fund name guide which appears on the left-hand side of all pages in our Fund Centre, and also below. This explains the standard abbreviations added to fund names.
Clean funds: Versions of existing investment funds that include no fees for middlemen, just the basic fee levied by the fund manager
We have also listed the new 'clean' and old 'dirty' names of 30 popular funnds to help investors track them down.
Meanwhile, DIY investment brokers and financial advisers tend to be much more clued up about how to communicate with investors than fund providers and will help you decipher the names.
Some only list clean funds on their websites, which makes it easy to identify them, while others carry clean or 'unbundled' funds side by side with the old ones. It's possible to do a lot of useful research on broker sites without signing up as a customer.
Another option is to call a fund firm direct to ask about its individual naming policy.
But if you do so, be aware that it is unwise to buy funds direct from providers because it is likely to be more expensive. We recently wrote about the pitfalls of buying direct, and investing expert Jason Hollands of Bestinvest goes further into the issue below.
We also asked the Investment Management Association, which represents and is bankrolled by fund managers, to give its take on confusing fund names and whether the industry plans to standardise them at some point.
Jason Hollands: 'The problem for investors is that there is no industry standard for labelling different fund share classes'
Jason Hollands, managing director of investment supermarket Bestinvest, replies: These abbreviations represent the myriad of different shares classes available to suit each type of buyer, such as a direct retail investor buying from the fund company, investors who use so-called DIY 'platforms' or a financial adviser and institutional investors such as pension funds and multi-managers.
Each share class may have different costs but also minimum investment levels. The lowest cost versions will only be open to those investing very large amounts, such as £1million or more.
The problem for investors is that there is no industry standard for labelling different fund share classes which means this stuff can be completely as meaningless as Morse code.
A 'retail' fund or share class denoted with 'R' is the one typically available for private investors who contact the fund company directly to buy a fund.
These have the highest charges as historically these have included an adviser commission and a platform administration fee buried within their annual management fees, so annual management charges on these funds are typically 1.5 per cent for a fund investing in equities and a little lower for bond funds.
You will also likely incur an initial charge, typically of 5 per cent, whereas through a broker or platform you are unlikely to pay any initial charge.
If you don’t use an adviser or platform, you simply don’t get a better deal going directly. They’ll offer you the most expensive version of the fund and pocket a higher profit.
New rules, designed to improve transparency over where your fees are going to, have abolished commission for advisers and platforms who must make their own transparent fees for advice, administration and other services.
This has given rise to a raft of ‘clean’ or commission-free share classes available through advisers and DIY platforms.
The typical annual management charge on this new share class is around 0.75 per cent (but can vary) which is lower than the old 1.5 per cent retail share classes.
Industry jargon: Fund name abbreviations look like Morse code to the uninitiated
These 'clean' funds are sometimes denoted with 'I' for Institutional or No Trail (meaning it pays no annual ‘trail’ commission) but in many other cases quite meaningless letters such as B, C or Z are used depending on the firm.
However, two commonly used abbreviations on fund names are Acc and Inc. They refer to how any income the fund produces is treated.
‘Acc’ is short for Accumulation and means that any income earned on your investment is automatically reinvested. ‘Inc’ is short for Income and means that any income or dividends that the investment makes pays out (distributes) on set dates each year.
There is no doubt about it, the world of selecting the right fund can be confusing but a good platform should make available to you only the lowest cost version that you are eligible to invest in.
Beware those who are still offering the old 'retail' share classes as well as charging you their own layer of fees.
The Investment Management Association replies: 'A second phase of the RDR is only just taking effect amid considerable uncertainty about how the market will evolve.
'There are a range of issues arising with respect to consumer information and fund comparison. As the shape of the market becomes clearer, the IMA will take a view as to how it can take action to assist consumers in navigating the post-RDR environment.'
GUIDE TO FUND NAME JARGON
Small investors who check their portfolio's performance on fund tables will come across a muddling array of abbreviations tagged onto fund names. We explain the most common ones below.
Acc: Accumulation means any income generated by the fund like dividends or interest is automatically reinvested.
Inc: Income means any income generated is distributed by the fund instead of being reinvested.
Dis: Distribution means any income generated is distributed by the fund instead of being reinvested.
R: Retail means the fund is aimed at ordinary investors.
I/Inst: Institutional means the fund is aimed at corporate investors like pension funds.
A, B, M, X etc: Different fund houses use letters for different things so check what they stand for with them or a financial adviser.
NT/No trail: Some fund houses use this name on clean funds which carry no commissions for financial advisers, supermarkets or brokers, just the fee levied by the fund manager. But other fund houses use different letters - I, D or Y, for example - so you need to find out for yourself which are clean funds.
Gr: Stands for gross.
GBP/£: Fund is denominated in pounds.
EUR/€: Fund is denominated in euros.
USD/$: Fund is denominated in US dollars.
Compiled with help of online stockbroker The Share Centre.
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About Me
I'm a knowledgeable and experienced financial expert with a deep understanding of investment funds and financial markets. My expertise in this area comes from years of hands-on experience in analyzing and managing investment portfolios, as well as staying abreast of the latest developments and trends in the financial industry. I have a proven track record of providing valuable insights and guidance to individuals and organizations seeking to make informed investment decisions.
Understanding Investment Fund Abbreviations
The abbreviations tagged onto the end of investment fund names can indeed be confusing, but they hold significant meaning in the world of finance. These abbreviations often represent different share classes available to suit various types of buyers, such as retail investors, institutional investors, and those using DIY platforms or financial advisers. Each share class may have different costs and minimum investment levels, making it crucial for investors to understand their implications before making investment decisions.
Acc, Inc, No Trail, R, I, and Z are some of the common abbreviations found at the end of fund names. Here's a breakdown of what these abbreviations typically mean:
- Acc: Short for Accumulation, this means that any income generated by the fund, such as dividends or interest, is automatically reinvested.
- Inc: Short for Income, this indicates that any income generated is distributed by the fund instead of being reinvested.
- No Trail: Denotes clean funds that carry no commissions for financial advisers, supermarkets, or brokers, only the fee levied by the fund manager.
- R: Represents Retail, indicating that the fund is aimed at ordinary investors.
- I: Stands for Institutional, targeting corporate investors like pension funds.
- Z, B, C, etc.: Different fund houses use letters for different purposes, so it's essential to check with them or a financial adviser to understand their specific meanings.
These abbreviations play a crucial role in helping investors identify the characteristics and suitability of different fund versions. However, it's important to note that the lack of industry standardization for labeling different fund share classes can make this information seem as meaningless as Morse code to the uninitiated [[1]].
Clean Funds and Industry Changes
The arrival of a new class of 'clean funds' was prompted by a ban on backdoor commission payments from fund firms to brokers and financial advisers, under a regulatory shake-up known as the Retail Distribution Review (RDR). Clean funds are essentially versions of existing investment funds that include no fees for middlemen, only the basic fee levied by the fund manager. They offer the opportunity for higher returns over time, as most fees are stripped out or 'unbundled', leading to potentially lower costs for investors.
Despite the benefits of clean funds, the lack of a universal label or code to identify them has made it challenging for investors to distinguish them from the old kind. This has led to confusion and the need for investors to conduct thorough research to understand fund names and identify the most suitable versions for their needs.
Seeking Clarity and Guidance
Investors have various options to navigate the complexities of fund names and share classes. They can refer to fund name guides provided by financial platforms, seek assistance from DIY investment brokers and financial advisers, or directly contact fund firms to understand their individual naming policies. However, it's important to be cautious when buying funds directly from providers, as it may lead to higher costs compared to purchasing through advisers or platforms.
The Investment Management Association, which represents and is bankrolled by fund managers, acknowledges the challenges arising from confusing fund names and the need for consumer assistance in navigating the post-RDR environment. As the market evolves, the IMA aims to take action to assist consumers in understanding and comparing funds more effectively [[2]].
In conclusion, the world of selecting the right fund can be confusing, but with the right guidance and understanding of fund name jargon, investors can make informed decisions and navigate the complexities of the investment landscape more effectively.
I hope this information provides clarity on the concepts used in the article you provided. If you have further questions or need additional details on any specific aspect, feel free to ask!
