Reading a fund’s own papers
Everything in this shelf can be checked against a real fund with three papers every European fund must publish. Here is how to read them, in order.
The KID: 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.
The costs table
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.
The factsheet
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.
The full list
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.
Putting it together
With the three papers you can answer the questions of this shelf 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.
Key takeaways
- The KID has the risk scale and every cost, in at most three pages.
- The factsheet shows the top holdings and how far the fund strays.
- The annual report lists everything the fund holds.