Explanation of fund names – Monevator
Just like a twirling mustache and ominous laughter mean you’re dealing with a villain, fund names instantly reveal a lot about the nature of an investment.
Learn to decode fund names and you can quickly scan product listings, spot quickly index funds and ETFs, and save time to find this you want.
Here is a typical fund name and its meaning:
Let’s break down the formula.
The asset management company created the product. In the United Kingdom, the main players issuing index trackers are:
- BlackRock aka iShares
- State Street aka SPDR
- Legal & General
The supplier’s name can be paired with a sub-brand. For example: iShares Heart.
Core ETFs are often a low cost entry into a provider’s lineup, although this is not a hard and fast rule.
The main asset class usually reveals whether you invest in equity (stocks and stocks) or obligations. If the name of the fund doesn’t suggest an asset class, you are probably considering an equity fund.
The asset sub-category indicates where the fund’s assets are concentrated. For a broadly diversified equity fund, this is usually a geographic region. For example: the developed world.
Specialized funds often associate the region with an investment style, such as Global Small cap.
The subclass of assets may be preceded by the name of the index followed by the product. As in: Avant-garde FTSE 100 ETF UCITS. This tells you that the ETF tracks the 100 largest companies listed on the London Stock Exchange.
FTSE, MSCI, S&P, Stoxx and Bloomberg Barclays are the main index providers. They are often referenced in tracker names.
The name of a bond tracker often signals the maturity dates of its holdings:
- iShares UK Gilts 0-5 ETF UCITS. This ETF holds UK government bonds (gilts) which will mature for up to five years. Five years and under indicates that the asset sub-category is short-term UK government bonds.
- SPDR Bloomberg Barclays 15 years and over GILt UCITS ETF. This ETF holds gilts that mature in 15 years or more. Anything over 15 years is a long-term obligation.
Gift – Most index funds, but not quite, include the word index or tracker in their name to make things a little easier.
Active fund names do not have indices, but not all trackers do.
A single fund can come in more forms than Zeus, as indicated by its share class. Instead of presenting itself as a bull or a swan as a Greek god, a fund simply puts a few letters in its name (for example, class A or D or I) to indicate that exactly the same product is available at different prices. .
Index funds tend to be limited to three types:
- Retail – Available to individual investors like you and me. The fund name may include the abbreviation Ret instead of a share class letter.
- Institutional – Available for pension funds and others. Sometimes available to you and me when an agreement has been made between the fund provider and a particular broker. Inst funds are cheaper than their retail counterparts.
- Platform exclusives – Some fund managers provide large online brokers As loyalty and Hargreaves lansdown with slightly cheaper versions of their index funds. The fund will offer a small discount on its annual fees, but will otherwise be the same fund found everywhere else, except for an “exclusive” letter designation in its name.
The share class letters have specific meanings in the United States. This does not apply here in the UK, where the classification rating is all over the store.
There are two varieties: Accumulation and Returned.
The accumulated funds reinvest your dividends and interest in the product without you having to lift a finger.
Income funds pay dividends and interest in the form of cash to your broker account. You can then reinvest or spend as you wish.
Accumulation funds are also called “capitalization” and usually contain one of the following abbreviations:
Income funds are also known as “distribution” and may have the following abbreviations:
You will notice that most ETFs include the abbreviation UCITS. This memorable acronym refers to EU regulations that allow the sale of funds on European markets.
UCITS funds are supposed to maintain certain standards that protect retail investors, such as a minimum level of diversification.
The UCITS rules also apply to index funds.
Non-European ETFs are not subject to UCITS regulations. Other exchange traded products like ETCs (Exchange Traded Commodities) are not either.
Take the hint. Use caution and do more research on non-UCITS products.
There is now a UK UCITS standard that facilitates post-Brexit harmony.
When we come to the end of a product name, you can see a cavalcade of cryptic codes, strewn about at the whim of the supplier.
Some ETF names are golden with their replication method.
For example: Lyxor Core MSCI World (RD) ETF UCITS – Acc.
DR stands for direct replication and indicates that the ETF physically holds the securities in the index.
The alternative is a synthetic ETF which is sometimes denoted by the word “Swap”.
ESG stands for Environment, Social and Governance. ESG funds are intended to support companies that strive to reduce the damage they inflict on the planet. Mileage varies.
ETF fund names often cite a currency, such as GBP, USD, or EUR. This is usually the currency in which the fund publishes its results and does not protect you against risk of change.
The information is useful when the currency of the product is hedging its return to neutralize the risk of fluctuations in the foreign exchange markets.
Some providers usefully mention currency hedges in the name of the fund.
For example: Xtrackers Global Government Bond UCITS ETF 2D GBP Covered.
This ETF hedges its return to the pound sterling. Its returns to UK investors are hardly expected to be affected by the hustle and bustle in the currency markets.
Incidentally, 2D in this name refers to the share class.
Sometimes you will see the letters IE, IRL, LU, or LUX fall into a name.
This is because Ireland and Luxembourg offer withholding tax rate if a fund is based there.
Some suppliers use it as a selling point. However, you won’t see less competitive tax jurisdictions reported.
You can confirm the domicile of your fund using its International Securities Identification Number (ISIN).
ISIN numbers contain a convenient two-letter country code, which helps you recognize the domicile of your product:
- IE = Ireland
- GB = Great Britain
- LU = Luxembourg
- FR = France
- US = US
- DE = Germany
- CH = Switzerland
- CA = Canada
- GG = Guernsey
- IM = Isle of Man
- I = Jersey
An ISIN number looks like this: GB00B59G4H82. The GB means that this fund resides in good old Blighty.
He is less known than the Irish and Luxembourgers investor compensation schemes are less generous than those in the UK.
Whatever you do, register the ISIN number of the fund you are interested in.
This eye-catching number is the only way I have found to reliably distinguish between fund versions and make sure I buy the voucher when I place an order.
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