What are funds?

Funds are pools of money. Some funds are vehicles for investment. Investors deposit their money into investment funds to be managed on their behalf.

Different Types of Funds

Multi-asset Funds

A multi-asset fund aims to protect its investors by spreading its capital across various assets. An asset is any item or resource held with the expectation it will gain value.

Multi-asset funds are often actively managed by investment experts who curate diverse portfolios.

The main asset classes are:

  • Equity shares: shares in publicly owned businesses
  • Fixed income: investments with fixed returns like bonds
  • Cash equivalents: short-term, highly liquid assets that can be quickly turned into cash

However, multi-asset funds may also invest in other areas, such as real estate, commodities, or cryptocurrencies.

Diversifying your portfolio by investing in multi-asset funds reduces risk because each asset type reacts differently to economic changes. However, every investment has some level of risk.

Offshore Funds

Offshore funds are investment companies based in offshore jurisdictions. An offshore jurisdiction is a foreign country or area. Companies and individuals often store funds offshore in regions with favourable financial regulations, especially regarding tax.

Why invest in Funds?

Funds are an easy and convenient way to invest. They contain a mix of investments which can help you to spread your risk, making them popular with novice and experienced investors alike.

Diversification: One of the major advantages of funds is that they enable you to build a diversified portfolio. ‘Don’t put all your eggs in one basket’. By investing even just a few hundred pounds in a fund, you can usually obtain exposure to far more stocks or bonds than you can by investing directly in the market yourself. In addition, funds enable you to gain access to an array of geographical markets around the world, a variety of specialist asset classes and a range of industry sectors.

Affordability: ‘Something for everyone’. In a fund you are effectively sharing the costs of investment with other people, which can help your money grow further.

Access to Assets: Overseas shares aren’t too difficult to buy these days, but some asset types remain far easier to access through a fund than if you were trying to buy them directly. Funds therefore allow you to build a portfolio that might ordinarily be out of reach – like investing in multiple commercial properties.

Low Maintenance: Funds are often fully managed by investment experts with a developed understanding of the areas they invest in and expertise to follow investment news. The average investor may lack the time or insight to analyse trends or complete due diligence in their investments, leading to poor choices.