Fund managers: what they do and how you invest with them

A fund is a collection of lots of different people's money, managed by a professional fund manager who invests it across a range of different assets, such as shares, property or other assets depending on the fund¹. In an actively managed fund, portfolio managers select shares, bonds and other assets with the aim of outperforming the market². In practice, that means someone else makes the day-to-day investment decisions, and you own a slice of whatever they buy.

You meet fund managers in more places than you might expect. If you have a personal pension, the money you pay in is put into investments such as shares by the pension provider³. If you hold an investment trust, each trust has a fund manager making day-to-day decisions, and most are run by an external management group appointed by the trust's board⁴. The same is true of workplace pensions and ready-made investment accounts: in each case a manager, not you, is choosing the underlying investments unless you deliberately take that job on yourself.

What a fund manager does with your money

The core of the job is selection and oversight. A fund manager takes the pooled money and decides which assets to hold, in what proportions, and when to buy and sell. In an actively managed fund the aim is to beat the market; in a passive fund, which is not run this way, the aim is simply to track an index. The distinction between the two approaches, and what it costs, is covered in active vs passive investing.

Why people hand this job over at all comes down to what a fund gives you access to. Independent guidance lists the main benefits: you gain access to a wider range of investments than you could normally buy yourself; your investment is managed by an expert fund manager; your money is spread across a number of different investments, giving a diversified portfolio and spreading risk; you gain economies of scale as the fund management and admin costs are spread amongst the investors in the fund; you can invest in specific markets, industries or even small unlisted businesses; and you can choose a fund which invests in line with your personal values and beliefs⁹. Diversification, and how it reduces risk, is explained in more detail in diversification and asset allocation.

The manager's decisions also shape what you get back. With a personal pension, how much you end up with depends on how much has been paid in, how the fund's investments have performed (they can go up or down), and how you decide to take your money³. A fund manager does not guarantee a result: the value of your investment can fall as well as rise, and the risks involved are set out in investment risk and your attitude to risk.

Who the manager is varies by fund type. Investment trusts each have a fund manager making day-to-day decisions, and most are managed by an external management group, which may manage several investment trusts⁴. Some fund groups run funds across many markets and brands, so the name on the fund is often the management group rather than an individual. Where you want your money to reflect particular values, there are funds built for that, covered in ethical, sustainable and impact funds.

How funds pool money: unit trusts, OEICs and investment trusts

Investment funds pool your money with that of other investors to give you a stake in tens or hundreds of stocks, bonds or other types of investments¹⁰. That pooling is the whole point: with a modest amount, you hold a slice of a large portfolio rather than a handful of individual holdings. The mechanics of how funds are priced and when your deal goes through are covered in how funds are priced and dealt.

There are many types of fund, such as investment trusts, unit trusts and exchange traded funds (ETFs)¹. Most investment funds are unit trusts, though some are exchange-traded funds¹¹. Unit trusts and OEICs (open-ended investment companies) are the two main open-ended structures: they issue units or shares to match the money coming in, and cancel them when money leaves. The differences between the structures, including SICAVs, are explained in OEICs, unit trusts and other fund structures.

Investment trusts work differently. An investment trust is a way to make a single investment that gives you a share in a much larger portfolio¹². It is a company in its own right, listed on the stock market, with a fixed number of shares. Because it is a company, it has independent boards of directors, just like any other plc, and the directors' duty is to look after your interests as a shareholder, meeting several times a year¹³. The comparison between the two structures is set out in investment trusts vs unit trusts and OEICs.

Funds are grouped into sectors so you can compare like with like. Investment trusts are classified by the trust's investment objective, for example UK Equity Income¹⁴. Funds can also invest in other funds, known as multi-manager funds, which adds another layer of management and, usually, another layer of cost¹⁰. On top of these sit ETFs, covered in ETFs explained, and investment trusts, covered in investment trusts explained.

Fund manager charges come out of the fund itself

The most important thing to understand about fund charges is where they come from. With a personal pension, the provider may charge you for starting and running your pension, and usually they take a percentage from your pension fund⁶. The same principle applies to funds generally: the charge is deducted from the fund's assets, so you never receive a bill, but the value of your holding grows more slowly than it would without the charge.

The costs come in several forms. Independent guidance groups them as: the ongoing charges figure (OCF), an annual percentage of your investments paid to the fund manager; performance fees; trading fees and stamp duty reserve tax; exit fees; and platform fees¹⁰. The OCF and what it includes is covered in fund charges and the ongoing charges figure.

How much varies enormously. You pay an annual management fee for a fund, which can differ significantly from one fund to another¹⁶. As a guide, fund management charges tend to sit between 0.1% and 0.3% for passive funds, although actively managed investments can cost more⁵. Investment trusts incur management charges, which can be high as most investment trusts are actively managed¹⁶. Where a fund invests in funds managed by the same firm, FCA rules require the product summary to disclose any actual or potential benefits arising from that arrangement¹⁷.

On top of the fund's own charge you may pay the cost of the account you hold it in. An investment platform may charge you each time you buy and sell a share, investment trust or exchange-traded fund, though fees for buying and selling traditional funds are less common¹⁸. Platform fees are covered in investment platform fees and charges, and dealing costs in dealing charges. One further charge to know about: where tax is due on interest on cash held in a stocks and shares ISA, the investment platform or the asset managers will remove that charge on your behalf¹⁹.

Ways to invest in funds: platforms, advisers and ready-made accounts

There are three broad routes into funds. The first is direct: some fund managers accept investments without an intermediary, and the AIC's guide to ways to invest sets out the options, including monthly savings plans²⁰. The second is through an investment platform, sometimes called a fund supermarket, which allows investors to buy and hold a range of investments in one place online, and sometimes with a smartphone app¹⁸. How these work is covered in how investment platforms work.

The third route is to let someone else choose. You can pay a financial adviser to recommend funds, or use a discretionary service where the adviser manages the investments on your behalf. Ongoing financial advice services may include reviews of investments, adjustments to financial strategies, and updates on financial products²¹. The differences between execution-only, advisory and discretionary services are set out in execution-only, advisory and discretionary services compared. If you do not have an adviser, ways of finding one include searching online, checking specialist investment publications, talking to your accountant or solicitor, checking the investment pages in major newspapers, and contacting trade bodies like IFA Promotion or the Personal Finance Society²². The cost of advice is covered in how much does a financial adviser cost.

A middle option is the ready-made investment. In pension drawdown, you can ask your provider to choose for you based on your preferences; these ready-made investment options are called investment pathways²³. Similar ready-made portfolios exist on platforms outside pensions, covered in ready-made funds and model portfolios and digital investment services and robo-advisers.

Whichever route you take, you keep the right to move. With a cash transfer between providers, your investments are sold and the proceeds passed to your new provider²⁴. ISA transfers work the same way in principle, and the process is covered in stocks and shares ISA transfers. Where to hold investments in the first place, between an ISA, a pension and a general account, is covered in ISA, pension or general account.

Ready-made investment accounts: fee and funding limit changes from 10 December 2026

Ready-made investment accounts, where the provider picks and manages the investments for you, are changing at several high street banks. From 10 December 2026, Bank of Scotland's Ready-Made Investments account fee changes to 0.3% a year, charged monthly with a £25 monthly cap, and charged only on the first £100,000 of investments, along with new terms and lower funding limits²⁵. Halifax is lowering its funding limits at the same time: one-off payments drop from £500 to a minimum of £1, and monthly payments start from £20²⁶. Lloyds is making the same change, with one-off payments starting from £1 rather than £500 and monthly payments from £20²⁷.

These accounts sit at the hands-off end of the market. Virgin Money's Navigator option, launched for its pension customers, is described as a straightforward, hands-off way to manage a pension which automatically adjusts your pension based on your stage of life²⁸. The underlying idea is lifestyling: as you approach retirement, most pension providers will shift you into lower-risk investments such as bonds, in a process known as lifestyling²⁹. The trade-off is control. The more the provider decides, the less say you have over the underlying funds, and the charges for that convenience are typically charged as a percentage of your investments, as the Bank of Scotland change shows²⁵.

Investing through a pension or SIPP

A SIPP, or Self-Invested Personal Pension, is a specialised pension scheme available in the United Kingdom⁷. SIPPs allow you to hold multiple investments and products, so you can manage your pension fund yourself and have more control over your choices³⁰. A SIPP can hold a range of thousands of shares, exchange-traded funds (ETFs) and mutual funds²⁹. SIPPs are generally for more experienced investors who have larger sums to invest²⁰.

The rules around access matter. You can open a SIPP if you are 18 years old or older, up to a maximum age of 75⁷. But clients must consider the access age of SIPPs, which currently is 55 years of age, rising to 57 in 2028⁷. Money moved into a pension cannot normally be withdrawn before that age, which is the main constraint on using a SIPP as a general investment account.

Moving money into a SIPP is a pension transfer: moving money from one personal pension to another, or from a personal or workplace pension to a SIPP, SSAS or QROPS³¹. Providers of SIPPs have their investors' funds held separately, so the money is safe if they were to go out of business³². What happens when a provider fails is covered in what happens if an investment platform or pension provider fails.

If you do not want to pick your own funds, you do not have to use a SIPP. A workplace or personal pension run as a master trust offers a default fund chosen for you; The People's Pension, for example, offers eight investment funds for members who want to make their own investment decisions³³. Master trusts are explained in what is a master trust via the pensions guide.

One point on transfer incentives: some providers offer cashback or rewards for transferring a pension in. Aviva's cashback offer requires customers to complete their transfer and retain funds in their SIPP account until 22 May 2027³⁴. Withdrawing the money before that date can mean losing the offer, so the retention terms are part of the cost of accepting it.

Unused pension funds will count for inheritance tax from 6 April 2027

The biggest change on the horizon for pension investors concerns death, not life. As announced at Autumn Budget 2024, the government will bring most unused pension funds and death benefits into scope of Inheritance Tax⁸. The measure takes effect from 6 April 2027: most unused pension funds and death benefits will be included in the value of a person's estate for Inheritance Tax from that date⁸.

The administration has been settled in stages. A consultation published on 30 October 2024 set out that pension scheme administrators will become liable for reporting and paying any Inheritance Tax due on pensions to HMRC³⁵. The government confirmed in July 2025 that personal representatives will be liable to report and pay any Inheritance Tax due on unused pension funds or death benefits⁸, and that pension beneficiaries will become jointly and severally liable for any Inheritance Tax due on the funds they are entitled to³⁶. Payments on account may be made at the maximum possible amount of Inheritance Tax, 40% of the value of any unused funds³⁶. The changes were made by Finance Act 2026, which brings unused pension benefits and death benefits into a deceased person's estate for Inheritance Tax purposes³⁸, and the Economic Affairs Finance Bill Sub-Committee published its report on the measures on 28 January 2026³⁷.

The rules before and after the change date are very different. Under the current rules, if you die before the age of 75 with all or some of your pension fund still invested, it will pass to your beneficiaries tax-free³⁹. If you are 75 or over when you die, your beneficiaries can either draw money from the pension as an income or take the fund as a lump sum, and both options will be taxed³⁹. In all other cases, including if you die after age 75, your pension usually cannot be inherited tax-free, and the inherited amount is normally added to your beneficiary's other income to calculate how much Income Tax is due²³. Beneficiaries might pay Income Tax to receive the money, depending on how old you are when you die⁴⁰.

From 6 April 2027, any unspent funds will count towards your estate for inheritance tax purposes⁴¹. Inheritance tax is charged at up to 40% where an estate exceeds the threshold, and from April 2027 pensions are included in the estate alongside savings, property and investments⁴². If personal representatives direct pension scheme administrators to withhold funds, beneficiaries will only be able to access 50% of the deceased's pension death benefits which may be subject to IHT, for up to 15 months after the date of death⁴³. Any unauthorised payments made from a deceased member's pension fund will also be in scope of Inheritance Tax³⁶.

Where to get help and how to complain

Free, impartial help is available. nidirect's guidance on getting information and help with pensions sets out where to look, including Pension Wise for people approaching retirement²². If you have lost track of an old pension, tracing services can help you find it⁵. Citizens Advice also covers pension income drawdown and the options at retirement³⁹.

If something has gone wrong with advice or a transfer, there is a set route. If you think you have been mis-sold a financial product, you can complain to the firm and then to the Financial Ombudsman Service³⁰. The ombudsman can look at complaints about ongoing financial advice services, including reviews of investments and adjustments to financial strategies²¹, and at complaints about transfers from personal pension arrangements³¹. What counts as bad advice, and when compensation may be due, is covered in mis-sold investments and bad investment advice.

For anything involving a fund itself rather than advice, the fund's documents are the starting point: what they are and where to find them is covered in fund documents: KIDs, KIIDs, factsheets and prospectuses. And before investing anywhere, the warning signs of investment scams are worth knowing, covered in investment scams.