Stock lending offsets costs, but it does carry some risk. Stock lending - The process where a fund lends its holdings to a third party in exchange for a fee. We generally think that full replication is best for investors, as it leads to more precise tracking, but recognise that this is unfeasible in some markets. Physical replication - When the fund holds all the shares or bonds in the index, whereas partial replication is when the fund chooses not to hold some smaller stocks. We feel these funds offer the best combination of quality and value. This is why they’re an important consideration when assessing passive funds. Unlike with active funds, where there is potential for a good fund manager to outperform an index, passive funds will broadly deliver the market less fees. We generally feel that broader, more diversified indices are better and have wider appeal.Ĭharges - Costs are the only guaranteed contributor to ongoing performance. Index tracked - It is important to consider which index a fund aims to track. We not only want to make sure each fund has tracked its index closely in the past, but that it’s is best placed to track well in future. We drew up this list after carefully researching the market. However, there are a few considerations unique to tracker funds outlined below. You can read how our analysts research and select funds for the Wealth Shortlist. The process for selecting tracker funds for the Wealth Shortlist is similar to the same as for actively managed funds. Our Wealth Shortlist contains tracker funds from across the main sectors that our analysts believe offer both quality and value.
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