Fund Factsheets

The financial market sees a large inflow of retail investors looking to undertake risk and invest their hard-earned savings into the equity market. While many investors can identify individual stocks for themselves, most investors are often advised to invest in a fund. Such funds comprise various stocks, which reduces the risks, increases the diversification, and allows the investors to invest beginning from a small amount. They constitute funds such as Exchange Traded Fund, which mimics a specific basket of stocks and comprise funds as per sector, industry, or capitalization of the company. Investing in such a fund is suitable for a risk-averse investor rather than investing in an individual stock.

A brief about Fund Factsheets

Investors would invest in funds based on their risk appetite as well as based on the information that is available on the funds. Such information on the funds, known as fund factsheets, is often compiled by the funds or an external party. These factsheets would comprise detailed information about a fund, including the fund manager, asset under management, investment style, and returns on the fund. They would allow the investor to validate a fund’s returns and compare them with various other funds to select the most appropriate fund for them.

Importance of Fund Factsheets

A fund factsheet would also contain information about the fund’s history and any changes made to it. It would allow the investor to assess whether the past returns which are earned by the fund are achievable in the future or not. A fund may have started as a small-cap fund but might recognize itself as a multi-cap fund at present. Such information would be available in the fund factsheets. It would allow the investor to understand that past returns can’t be compared because of the fund’s investment category’s inherent difference. A fund factsheet would also provide a benchmark against which to review the fund’s returns. It would allow the investor to understand the actual alpha generated by the fund and fund manager.

Apart from the investor, a fund factsheet is equally important for a fund house as well. A fund factsheet can be used as marketing material by the fund as they advertise to new clients. It would allow them to display their strengths as well as highlight their past achievements. Apart from marketing, the fact sheet would be a useful addition to the firm’s brochure and allow potential investors to quickly and efficiently gain knowledge about key points. Fund factsheets are one of the most important documents for a fund, regardless of the category, and are usually prepared by a consultant who is adept at preparing such factsheets. A fund factsheet provides the identity to the firm, including all the basic and advanced details of the fund. From companies and sectors they have invested into to the returns they have generated, all such information is available in the factsheet, which aids in the investor’s decision-making.

What does the future of Fund Factsheets look like?

The increasing use of technology has also had an impact on such factsheets. One of the tools being increasingly used by funds is an interactive fund factsheet. Such factsheets would provide additional information with a mere click of the mouse, which would allow investors access to additional information. Information such as industry insights of the company the fund has invested in or has the highest allocation would allow the investors to gain further insight into the fund. Many funds and fund managers also provide various technical terms in the fund factsheet, but often investors are unable to understand the same. Through the interactive fund factsheet, an effort is being made to educate the investors about the same terms. Not only will this increase the quality of investors investing in the fund, but it also allows the fund to impart proper details.

Fund Managers and Funds often rely on consultancy firms to help them prepare such fund fact sheets. Not only should such fact sheets be available in various formats, but the data must also be easily validated.

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