What’s in a fund name?

The fund industry doesn’t help itself with complexity sometimes. A case in point is the wide array of letters added after fund names – inc, acc, A, B, Z, H and I! What do they all mean? Rob Morgan explains.

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  1. Rob Morgan

The first thing to know is that for any unit trust or OEIC fund there is almost always more than one unit you can buy. That’s for several reasons:

  • There are usually two types of unit in a fund that generates a significant income
  • There are varying pricing structures for different unit classes in the same fund
  • There are other variations such as currency denomination or currency hedging

For more on different types of fund and their various characteristics see our Introduction to Investing in Funds guide.

‘Inc’ and ‘Acc’

Funds that produce income from share dividends, interest from bonds or other income such as rent from properties often have two different unit classes. Income (abbreviated to ‘inc’) units pay out the income so it can be taken by the investor, whereas Accumulation (abbreviated to ‘acc’) units retain any income to boost the unit price.

Some funds may carry the abbreviation ‘Dis’ – which standards for ‘distribution’ – instead of Inc – but it amounts to the same thing. Owners of income or distribution units can reinvest the income in more units if they want to, but the accumulation units offer a more convenient, automatic way of doing so.

Individual letters

Many funds also have a single letter attached to their name. This isn’t secret fund manager code, it’s a way of denoting the class of unit, and thereby the type of investor eligible, as well as the charging structure and minimum investment amount.

Often an ‘R’ class is a standard ‘retail’ unit and ‘I’ a cheaper ‘institutional’ unit that may only be available to a certain type of investor or via a larger organisation with sufficient assets in the fund. Often, Charles Stanley can qualify for cheaper units for customers by virtue of size. You will see ‘I’ classes of unit as well as an assorted array of other letters for funds listed on the Charles Stanley Direct service.

Unfortunately, fund managers use different letters to denote their various classes and most of the alphabet seems to be covered -  A, B, C, D, F, G, I, J, P, X and Z are all fairly common! There is not much consistency and a particular letter might denote one thing for one group and something different for another.

We endeavour to only present the cheapest available unit of a fund on Charles Stanley Direct by periodically sweeping the universe, but there may very occasionally be duplications, in which case you should compare the annual charges and TOC (or Total Ongoing Charges’) figures to ensure you buy the best one.

Currencies

Sometimes you may see further suffixes relating to currency when a fund has unit classes for different base currencies – even though the underlying investments are the same. For pounds, euros and dollars these are generally abbreviated to GBP, EUR and USD.  This is more commonly seen in exchange traded funds rather than unit trusts and OEICs because UK retail investors usually just have access to GBP versions in these.

Some funds also have currency ‘hedged’ classes for overseas markets. These cater for investors who want exposure to the asset class or strategy but strip out the impact of foreign exchange movements.

This is often the norm for lower risk areas such as bonds where currency movements could overwhelm returns from the underlying assets. In these cases, there will be a relevant policy outlined in the fund’s objectives. However, for funds where most investors don’t want to hedge currency, a special unit class can be created for those that do. Often this is designated ‘hedged’ or ‘H’ for short.

Be aware that a currency hedged version of a fund can have very different returns from an ordinary non-hedged unit class, especially when the currency in question is volatile against the pound. The Japanese Yen is one example. Generally, these unit classes are aimed at more sophisticated investors who are taking a particular view on the currency and ordinary investors should stick to the conventional unit. Currency hedging adds to the expenses of that unit class, so they typically cost slightly more.

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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