Fund managers: who runs the funds you buy

A fund manager is the firm that runs an investment fund: it decides what the fund buys and sells, and looks after those investments on behalf of everyone who has money in the fund. Investment funds pool your money with that of other investors, giving you a stake in tens or hundreds of stocks, bonds or other investments, rather than leaving you to pick and manage each one yourself¹. When you hold a fund inside a personal pension, it is the pension provider that puts your money into investments such as shares².

The practical appeal is set out plainly by the investment trust industry's own guide: 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, and the management and admin costs are shared among all the investors in the fund³. You can also choose funds that target specific markets or industries, or that invest in line with your personal values³.

What a fund manager does not do is advise you personally. Choosing which funds to hold, and whether to hold them in an ISA, a pension or a general account, is a separate job done by you, by a platform, or by a financial adviser. This page explains what the manager does, what the main types of fund are, what the charges look like, and what protection exists if something goes wrong.

What a fund manager does with your money

A fund manager takes the pooled money of a fund's investors and invests it according to the fund's stated objective. If the fund aims to track the UK stock market, the manager's job is to hold the investments that achieve that; if it aims to beat a market or invest ethically, the manager makes active choices about what to buy and sell. The manager is accountable for running the fund in line with that objective, not for telling you whether the fund suits you.

The benefits of this arrangement, as the Association of Investment Companies sets out, are access to a wider range of investments than you could normally buy yourself, management by an expert, a diversified portfolio that spreads risk across many holdings, and economies of scale, because the fund's management and admin costs are shared among all its investors³. Funds also let you invest in specific markets, industries or even small unlisted businesses, and to choose a fund that invests in line with your values and beliefs³.

If you hold funds inside a personal pension rather than an ISA or general account, the same principle applies with one extra layer: the money you pay into a personal pension is put into investments such as shares by the pension provider². In a default workplace or personal pension, the provider and its appointed managers make the investment decisions; in a self-invested personal pension you choose the funds, and the fund managers run whatever you have chosen.

Professional management does not mean a guaranteed result. Even funds marketed as low risk carry the risk of loss: Vanguard's own description of money market funds states that "the value of your investments could fall you might not get back what you invested"⁸. The manager's job is to run the fund as promised, and the risk of loss remains with you, the investor.

Unit trusts, investment trusts and ETFs: the three main types of fund

There are many types of fund, and the three you will meet most often are investment trusts, unit trusts and exchange traded funds (ETFs)⁴. All three pool money and give you a stake in a spread of investments, but they are structured differently, and that affects how you buy and sell them.

• Unit trusts and OEICs are the standard "managed funds" sold by fund houses and platforms. You buy units or shares in the fund directly from the manager, and the price reflects the value of what the fund holds. The site's guide to fund structures explains these in detail.
• Investment trusts are companies listed on the stock exchange, so you buy shares in the trust like any other share. The investment trusts guide covers how they differ, including how their share price can differ from the value of their assets.
• ETFs are also exchange-traded, and typically track an index or a market. The ETFs guide explains how they work and how they differ from index funds.

Funds do not only invest in shares. As well as equities, funds can invest in bonds and gilts, property, and even other funds, which are known as multi-manager funds¹. A multi-manager fund is a fund whose manager's job is to pick other managers' funds, which adds a layer of selection but also a layer of charges. The bonds, gilts and money market funds pages cover what sits inside these funds.

Where you hold them, most investment platforms offer investment funds alongside shares, investment trusts, ETFs, bonds and other investments, though some platforms only offer investment funds⁹. The choice of fund type does not change who the manager is or what the manager does; it changes how the fund is structured, priced and traded. The guide to how funds are priced and dealt explains dealing times, and investment trusts vs unit trusts compares the two side by side.

Fees and charges: the annual management charge and platform fees

Fund investing has two layers of cost, and both show up in what you end up with. The first layer is the fund's own costs. Which? identifies five types: the ongoing charge figure (OCF), an annual percentage of your investments paid to the fund manager however the fund performs; performance fees; trading fees and stamp duty reserve tax; exit fees; and platform fees¹.

The ongoing charge figure is the headline number to look for. It includes the annual management charge plus additional costs such as trustee and auditor fees, taken directly out of the fund¹⁰. Because these costs come out of the fund itself, you never receive a bill for them; you see them in the OCF quoted in the fund's documents, and their effect is that the fund's returns are reduced by that amount each year. The guide to fund charges and the ongoing charges figure explains how to read it.

The second layer is the platform fee, if you hold the fund through an investment platform. Investment platforms charge either a percentage annual fee or a fixed amount each year¹⁰. A percentage fee grows with the size of your holdings; a fixed fee stays the same, which tends to matter more for larger portfolios. The platform fees and charges page compares how these work.

Two further points are worth checking before you buy. Performance fees reward the manager for beating a target and are more common on some actively managed funds¹. Exit fees can apply when you sell or transfer a holding, so they matter if you may move providers later¹. The dealing charges page covers the costs of each trade, and stamp duty on shares explains the tax that applies to share purchases.

One structural point protects you on charges: where a fund invests in other funds managed by the same person or firm, the rules require disclosure of any actual or potential benefits arising from that arrangement¹¹. So if a fund house's own fund of funds buys its own house's funds, that must be disclosed rather than hidden.

Fund manager, platform or financial adviser: who does what

Three different kinds of firm are often involved in holding funds, and their jobs are distinct.

• The fund manager runs the fund: it chooses and looks after the investments inside it, for all investors in that fund. It does not know your circumstances and does not advise you.
• The platform is where you hold and deal. An investment platform, sometimes called a fund supermarket, allows investors to buy and hold a range of investments in one place online, and sometimes with a smartphone app⁹. The platform administers your account, executes your deals and reports to you; it does not pick funds for you unless you have chosen a managed or ready-made service, covered in the ready-made and model portfolios guide.
• The financial adviser looks at your personal situation and recommends what to do. Financial advisers are regulated by the FCA¹², and all financial advisers in the UK are regulated and registered by the Financial Conduct Authority¹³. The FCA regulates financial services firms in the UK, including those who provide financial advice regarding pensions and Self Invested Personal Pensions¹⁴. The execution-only, advisory and discretionary comparison explains the three service levels.

The boundaries can blur, because some firms do more than one job. True Potential Investments, for example, is described in evidence to Parliament as an FCA-regulated platform operator, investment manager, and pension operator and administrator¹⁵. That does not change what each role means; it means one firm wears several hats, and you can check which on the FCA Register.

If you are investing for someone else as their attorney or deputy, the same structure applies, and the official guidance on investing in that capacity points to the same regulated-adviser framework¹³. Free guidance, as distinct from regulated advice, is also available: the government has consulted on statutory arrangements for free and impartial financial guidance, including the Money Advice Service and Pension Wise¹⁶. MoneyHelper, the government-backed service, is the current home of that free guidance.

Starting to invest in funds: from around £50 a month

You do not need a large sum to start. You can invest in investment trusts from as little as £50 a month³, and the same figure appears across the industry's guides to getting started: small amounts starting from around £50 a month, depending on the fund⁴. The £50 figure is a common minimum for regular monthly investment rather than a rule, and individual funds and platforms set their own minimums, so check both before choosing. The minimum deposit page covers this in detail.

Regular monthly investing has a practical advantage beyond the low entry point: money goes in on a schedule, and the lump sum vs monthly comparison explains how the two approaches behave differently. The how to set up monthly savings page walks through the mechanics on a platform.

Funds are also a common entry point for people new to investing. The investment companies guide is designed for people who are new to investing, and also for people who have invested before but are not familiar with investment trusts¹⁷. That said, being suitable as a starting point is not the same as being right for you: whether to invest at all depends on your goals, how long you can leave the money invested, and your attitude to risk, covered in the investment risk and how investing works guides. Free, impartial guidance is available from MoneyHelper before you commit anything.

Where you hold the funds matters for tax: an ISA, a pension or a general investment account each treat income and gains differently, and the where to hold investments page compares them. The investing vs saving page helps with the prior question of whether to invest at all.

How your fund holdings are kept separate if a firm fails

The core protection when a regulated firm fails is separation: your money and investments are not the firm's own money. The FSCS explains that customers' funds must be held separately from the firm's own funds, typically with a bank¹⁸. The same principle of segregation, separating client funds from business funds, applies across regulated payment and e-money firms¹⁹. In practice this means that if the platform or provider fails, the holdings it administers for you are identified as yours and are not available to the firm's creditors.

That protection depends on the firm being authorised. If you deal with a firm that is not authorised, you will not be protected by the FSCS if it goes out of business, so it is unlikely you would get your money back²⁰. You can check any firm on the FCA Register before you use it²⁰. The what happens if a platform fails page covers this scenario in full.

Two limits on this protection matter just as much as the protection itself. First, separation protects your holdings from the firm's failure; it does not protect the value of the holdings. You will not be compensated for investments falling in value, or for a company in which you hold shares going bust, unless the poor performance resulted from bad advice by a regulated independent financial adviser that has since gone bust¹². The does FSCS cover poor performance page explains where that line sits.

Second, some investments sit outside these arrangements altogether. For peer-to-peer agreements, the FCA's own risk summary states that if the platform fails, it may be impossible for you to collect money on your loan²¹. The peer-to-peer lending and unregulated investments pages cover these gaps.

Transferring funds and pensions between providers

A transfer moves your investments from one provider to another without selling them, and the rules set deadlines for it. For ISAs, the regulations provide that a transfer or withdrawal of funds and investments must take place within 30 days of instruction unless excepted⁵. For pensions, a transfer is where you move the money in your existing pension to a different scheme or provider, often so you can get a better deal⁶; a transfer often takes between two and six weeks, but your provider has up to six months to action your request⁶.

Those deadlines are not always met, and there is a route to redress when they are not. In a case reported by Which?, a stocks and shares ISA transfer went wrong: Vanguard accepted it should have sent the transfer request to the current provider within five business days but was 17 business days late, and ultimately accepted responsibility for 38 business days of delay²². It paid the customer £300 as a goodwill gesture, but the Financial Ombudsman went further, ruling that Vanguard had been responsible for 50 calendar days of delays and requiring it to reimburse the customer for any income he would have received from the fund had he been invested from 3 June²². The lesson for consumers is that delays are measurable, complainable and, in some cases, compensable.

Pension transfers have extra safeguards attached, because they are a common target for scams:

• Trustees of defined benefit schemes must provide members with a link to FCA information on considering a pension transfer from a defined benefit pension²³.
• The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 introduced new powers for trustees and managers to protect members from scams in the exercise of the statutory right to transfer²⁴.
• These powers enable trustees and managers of transferring schemes to prevent transfers where red flags are raised, or to mandate additional checks²⁵.
• Where a with-profits pension fund is transferred to another type of plan, providers may apply a market value adjustment, reducing what the transfer is worth; this is a known source of complaints²⁶. The with-profits funds page explains MVAs.

Two further points on pensions. If the employer sponsoring your defined benefit pension scheme becomes insolvent, the Pension Protection Fund will assess the scheme to see if it can take it on²⁷, which is a protection that transfers away from. And on overseas transfers, the scheme administrator and the member are jointly and severally liable for any overseas transfer charge due²⁸. The pensions section covers the decision itself, and Pension Wise offers free guidance for those approaching retirement.

Scams, cold calls and complaints

The clearest scam warning in official guidance is repeated across every pension option: do not withdraw or transfer your pension because of a cold call, visit, email or text, because it is likely a scam designed to steal your savings⁷. The same warning applies to accessing pension money through drawdown²⁹, and to transferring money to a new pension provider or investing because of a cold call, where you could lose your money and face a large tax bill⁶.

Being contacted unexpectedly about an investment opportunity is a common warning sign, because legitimate firms will not contact you out of the blue³⁰. The rules on live pension marketing calls allow them only where the organisation is a trustee or manager of the pension scheme, or a firm authorised by the Financial Conduct Authority³¹. Genuine public bodies are explicit about this: the Money and Pensions Service states it has never, and will never, turn up to your home or contact you out of the blue via phone, WhatsApp, email or text³⁰; the Pensions Ombudsman says it will never contact you out of the blue³²; and the Insolvency Service will not randomly contact you to request money³³. If someone claiming to be from your bank, the Payment Systems Regulator or another regulator contacts you out of the blue, the advice is to hang up and contact the organisation directly using publicly listed contact details, and not to be pressured into sending money³⁴. The investment scams page lists the warning signs in full.

If something has already gone wrong, complaints have a defined route. The Financial Ombudsman Service can look at complaints about businesses regulated by the Financial Conduct Authority, including some pension schemes and their services³⁵. Once a complaint form is completed, the case is assigned to a case handler who investigates using evidence from the consumer, the financial business and any relevant third parties²⁶. The ombudsman can also look at complaints about the way a financial business has dealt with a scam involving unauthorised payments, stolen details or identity theft³⁶.

The routing between the two ombudsmen confuses people, so it is worth being clear:

• Complaints about a financial adviser or a pensions provider regulated by the FCA go to the Financial Ombudsman Service³⁷.
• Complaints about the sale or marketing of pensions, or about financial advisers, also need to go to the Financial Ombudsman Service, not the Pensions Ombudsman³⁸.
• If the firm you want to complain about is not on the FCA Register, the complaint should be referred to the Pensions Ombudsman³⁹.

Scams themselves should be reported to the pension provider, the Financial Conduct Authority, and Action Fraud⁴⁰. If you have received poor advice, the mis-sold investments page explains the complaints process, and the consumer protection section sets out the wider framework.