A fund factsheet is an overview of a fund including the fund’s investment objective, risk level, costs, past performance and holdings details. Factsheets are usually published on a monthly basis and available online for free, and are thus one of the most convenient and timely tools for investors to learn about a fund. When you are choosing between different funds, factsheets also provide a useful and comparable summary.
What are the most useful pieces of information to look for within a fund factsheet?
We can classify the data on a factsheet into three categories, namely (i) fund related information; (ii) performance and return; and (iii) portfolio information. Being the most important fund information, the “investment objective” tells you briefly where the fund invests in terms of geography and industry sector, as well as whether it seeks capital growth, income generation or a combination of both.
Many investors will be interested in fees which are reflected in terms of management fee or performance fee, etc. Some factsheets show “expense ratio” which measures what it costs the fund manager to operate the fund. Generally speaking, the lower the expense ratio the cheaper the cost.
Someone gives me a factsheet mentioning that the fund performed well. How could I tell if that is true?
Most factsheets provide performance figures across different time frames and compares it with the fund’s benchmark or a market index. Many fund houses provide both cumulative and calendar year performance for comparison. In evaluating the performance of a fund, you should look across different time frames to see if the fund performed consistently or with drastic ups and downs. Making comparison of a fund against its benchmark or peers would also be helpful in understanding how it performs compared with the market or similar funds. Last but not least, you must always remember that while historical performance data provides reference on how the fund performed in the past, it is no guarantee of future results.
Besides the above, what else would a factsheet tell about the fund’s investments?
The portfolio composition section would be useful. Depending on the nature of the fund (e.g. bond, equity, multi-asset), information regarding country and sector allocations, as well as “top 10 holdings” would tell how the fund is managed. This is especially meaningful when you compare a fund with similar nature but managed by different managers. For instance, Fund A may focus on China while Fund B on India despite both of them being “Asian equity funds”. Data such as “top 10 holdings” and “number of holdings” will also give you a quick idea if the portfolio is concentrated or diversified.
Fund factsheet sometimes can be lengthy with technical terms, here we cover five essential statistics on fund factsheets. Even though fund strategies can vary significantly, these five statistics are some of the most universally accepted, making them important to virtually all types of funds. Please bear in mind that all statistics calculated from historic data are not indicative of future performance.