Key information document Practice document Page 1 of 3
Larch World Equity Fund Class A, accumulating · a UCITS fund · made up for this lesson
Purpose This key information document tells you what this fund is, its risks and its costs, in at most three pages.1
What are the risks and what could I get in return? Risk indicator: 4 out of 7.2 The indicator assumes you keep the fund for five years.
1 2 3 4 5 6 7
The scenarios show what you might get back in good and bad cases.3
What are the costs? Other relevant information A factsheet is published each month.5 The annual and half-yearly reports list every holding.6
This paper is made up for Red Start Education and describes no real fund. Past performance does not predict future returns.
Line 1 · The KID
Three pages, the same for every fund “This key information document tells you what this fund is, its risks and its costs, in at most three pages.”
Since 1 January 2023 every UCITS fund sold to private investors in the EU has a Key Information Document of at most three pages. It says what the fund is, its risk on a scale from 1 to 7, what you might get back in good and bad cases, and every cost.
It lets the manager Describe the fund in its own words, in three pages at most It never may Leave out its risk number or a cost Read it slowly Every KID has the same parts in the same order, so two funds can be compared line by line.
Check it yourself Find your own fund’s KID on its website and look for these same headings.
Source: PRIIPs Regulation (EU) 1286/2014, article 6(4)
Line 2 · The risk number
A scale from 1 to 7 “Risk indicator: 4 out of 7.”
The summary risk indicator runs from 1, lower, to 7, higher. This made-up fund is a 4.
It lets the manager Show its risk on the same scale as every other fund It never may Leave the risk number off its KID Read it slowly The number is a summary for comparing funds. A 4 is not good or bad on its own.
Check it yourself Find your own fund’s number, then another fund’s. Which one is higher?
Source: PRIIPs Regulation (EU) 1286/2014
Line 3 · Good and bad cases
What you might get back “The scenarios show what you might get back in good and bad cases.”
The KID shows what you might get back in good and bad cases. They are cases, not promises.
It never may Show you only the good case Read it slowly Read the bad case first: it is the one you would have to sit through.
Check it yourself Find the bad case in your own fund’s KID.
Line 4 · The costs table
What it has to earn first “Ongoing costs, each year”
In the KID, find the yearly ongoing costs and the transaction costs, and any performance fee. Add them up: that is what the fund has to earn each year before you earn anything. Compare it with an index fund on the same market.
It lets the manager Take the costs shown, each year It never may Charge a cost this table leaves out On this paper 1.5% + 0.2% = 1.7% a year, before you earn anything.
Read it slowly Every KID sets costs out the same way, so they can be compared fund by fund.
Check it yourself Add up the costs in your own fund’s KID.
Line 5 · The factsheet
The monthly picture “A factsheet is published each month.”
Most funds publish a monthly factsheet: the largest holdings, the split by country and sector, the return against the benchmark, and often tracking error. Look at how much the top ten holdings weigh together. It shows how concentrated the fund really is.
It lets the manager Change its holdings each month, inside its mandate It never may Keep its largest holdings out of sight Read it slowly The top ten’s total is the quickest single number for how concentrated a fund is.
Check it yourself Add up the top ten holdings in your own fund’s latest factsheet.
Line 6 · The full list
Every holding, twice a year “The annual and half-yearly reports list every holding.”
Every UCITS fund publishes an annual and a half-yearly report with all its holdings, and many index funds show every holding on their website each day. Check whether what it holds matches the mandate in its prospectus.
It lets the manager Hold anything its mandate allows It never may Hold something it leaves out of the report Putting it together With the three papers you can answer this table’s questions for your own fund: what it promises, how far it strays from its benchmark, which factors it leans on, how concentrated it is and what all of it costs. No fund name is needed to learn to ask them.
Source: UCITS Directive 2009/65/EC, article 68
Read it slowly The report is where the promise meets what the fund really holds.
Check it yourself Pick one holding from your fund’s report and find the line of the mandate that allows it.