Concept

In theory all funds that classify themselves as actively managed should outperform the index or benchmark they compare themselves to.

The rules on what assets managers can hold in their portfolios are subject to industry-wide classification rules drawn up in the case of open ended funds – unit trusts and open ended investment companies – by the Investment Association, and in the case of closed ended funds – investment trusts – by the Association of Investment Companies.

These classifications are put in place to ensure that, say, two or more different funds specialising in Japanese stocks can be more easily directly compared with respect to the types of holdings in their portfolios, their performances against commonly used benchmarks, and the costs or expense ratios that investors bear.

So-called multi-asset funds enable managers to go far beyond just buying stocks in listed companies – holding derivatives, property, cash, or even stocks of precious metals

This multi-asset approach to investment means that fund managers need to have a more rounded knowledge of different asset classes – so that investors are given an expert manager no matter the investment climate that presents itself.

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