Funds

A fund is a type of pooled or 'collective' investment that gives investors access to a range of different companies. Each investor in a fund receives shares or units representing a portion of the fund's holdings.

Funds are usually structured as unit trusts or open-ended investment companies (OEICs). In practice there is little difference between these two structures, but a full explanation can be found on our Unit Trusts & OEICS page. These types of funds are sometimes called 'mutual funds', although this is not a commonly used term in the UK. Other types of funds include ETFs and investment trusts.

There are two broad management styles for funds: active and passive. Active funds are looked after by a fund manager who specially selects the underlying investments. The manager constantly checks and balances the fund's investments to keep it on track with its objectives.

Passive funds (also called 'tracker' funds) usually invest in the constituents of a stock market index and will follow the market's fortunes up and down. There is less management involved with passive funds, so they tend to have lower costs than active funds.

Read more about active vs passive investing

Funds are usually traded once a day at a time set by the fund manager. This means there is often a delay between the time you place an order to buy/sell and when your fund is actually traded. There is also a longer settlement period to factor in when you buy and sell funds. It usually takes between 3 and 4 days for your trade to fully complete and your units in the fund (or cash if you sold) to arrive with you.



You can invest in funds through investment platforms like ii. Before you can invest, you'll need to open an investment account, then research and choose the funds you want to buy. Always remember to check the investing costs, including trading fees, account charges and the fund's ongoing charges (OCF).

Funds are a type of ‘collective investment’. This is where your and other investors’ money is pooled together, and a professional fund manager selects which companies to invest the total in. The fund manager will then manage the underlying investments in the fund, rebalancing it when necessary to ensure it meets its goals.



Traditional funds don’t trade instantly on a stock market as shares do. Instead, they are usually bought and sold once daily at a set time.

Active funds

An actively managed investment fund has an individual fund manager (or a team of managers) who make investment decisions for the fund on what to buy and sell. Investors who buy active funds hope the fund manager(s) will outperform rival active funds and a comparable stock market index.  

Passive funds

Passive funds, also known as ‘index trackers’, mirror the composition of a stock market index, such as the FTSE 100. That means there are no active decisions regarding what to buy and sell. Investors should expect the return of a passive fund to be close to the performance of the index it tracks but with a slight lag due to the fund charge. Index trackers can also be structured as exchange-traded funds (ETFs). 

Read more about active vs passive funds

Income funds pay out any income generated by the fund, such as dividends from shares or coupons from bonds. While accumulation funds simply reinvest that income back into the pool of money invested by the fund manager. 

Many funds offer both an income variety or ‘share class’ and an accumulation share class. The income share class is suited to investors who are ready to take an income from their investments. For example, retirees who want to supplement their retirement income.

On the other hand, the accumulation share class can be a better choice for investors who have the time to build up their investments and pension. This is because the accumulation share class can benefit from the power of compound interest. 

'Mutual funds' is essentially another term for investment funds. It’s a term used more commonly in the US.

When you buy and sell funds with ii, you’ll pay our standard trading charges on top of your monthly plan subscription. View our charges to find out more.

You can skip the trading charges if you decide to go down the regular investing route when buying ETFs.

Funds also charge a separate annual fee. This is a small percentage of your investment which goes directly to the fund manager. Active funds tend to have an ongoing charges figure (OCF) of between 0.85% and 1% a year. For context, that works out at £85 to £100 on a £10,000 investment. Passive funds are cheaper, with some index funds and ETFs costing less than 0.1%. That would work out at £10 on a £10,000 investment.