How on earth do you go about choosing an actively managed fund? There are more than 2,000 open-ended vehicles available for sale in the UK, plus another 400 or so investment trusts? The choice is daunting. That's where our Top 100 funds comes in.
The IC Top 100 represents what we believe to be the best actively managed funds across all the major sectors and asset classes, so wherever you choose to invest you should find something of interest. It doesn't include exchange traded funds, or any other passive fund - ie funds where you pay a fund manager to pick stocks and add value.
Of course, this is not the only 'select list' of funds available to investors. But it is different in several material respects to others. Unlike lists of recommended funds from various fund platforms and stockbrokers, we are not remunerated in any way by the companies behind our Top 100 funds. Our selections are completely independent.
Also, unlike some other recommended active fund lists, we don't limit our choices to open-ended funds, such as unit trusts and oeics. As a result, almost half our chosen funds are investment trusts, because we like them for lots of reasons some of which are outlined here..
But the 49 investment trusts that have made it into our Top 100 may sometimes trade on a hefty premium to their underlying net asset value. If this is the case it may be best to keep them on your watch list and delay your purchase until they are selling at a discount.
How did we pick out the 100 funds? It's not just about performance, important though that is. Keeping costs down is vital, as charges can really eat into returns over time. For that reason, we don't tend to recommend expensive funds (with total expense ratios of 2 per cent or more) unless there is a rock-solid investment case. We're also wary of performance fees, although arguably they do align the interests of managers and investors.
We've also looked at some other factors, such as the risk taken on, the tenure of a manager, the consistency of returns and the liquidity of the units or shares - some quite successful funds have been 'soft-closed' to new investors.
While many of our fund recommendations may often be a note from a stockbroker or independent financial adviser (IFA), we then add our own research and analysis - in fact, we turn down many recommendations from third parties. You can be sure these are our opinions, not those of the broker or IFA.
We don't monitor this list continuously, but we will review it every so often, taking account of things such as relative performance, management changes and new launches. You can read the previous Top 100 published in August 2011 here. Bear in mind, too, that it's very rare for a fund manager to beat a benchmark consistently across the investment cycle. Some funds will race ahead when times are good but fall sharply when markets take a tumble. Others will preserve value in tough times, but lag benchmarks in stock market booms. Funds are long-term investments and you should really be prepared to invest for five years or more to get the true benefit.
We have included links to relevant fund tips, fund profiles and interviews with the fund manager. Please note that these can help with your background research but may not reflect the current thinking or investment strategy of the fund manager.