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How we select our Active funds

Remember that Smart Investor does not offer financial advice, so you must decide how to invest your money. The criteria outlined here can only help you narrow down the choice. Investing in funds is like any other type of investment. The value of your investment can fall as well as rise. You might not get back the amount you invest.

About our Funds List - Active funds

Our active fund selection is chosen by Barclays’ investment specialists are and it’s made up of funds that have built solid reputations and established sound investment processes.

We believe selecting funds is both a science and an art, and our team of investment analysts have developed a process that encompasses both. The list currently features around 40 active funds our experts believe have the potential to generate consistent returns in the medium to long term – five years or more.

Most funds focus on a single country, sector or type of asset, such as shares or bonds. We believe that all investors should make sure they spread the risk of their investment portfolio by holding a number of funds across these different fund types. Any challenges with one fund will hopefully be offset by other funds that aren’t experiencing the same issues.

How do we select active funds?

Like science, our process is formal, structured and repeatable to create comparable data points across institutions and fund managers. But, like art, our process is also informed by a philosophy that guides our collective judgment on a manager. The process we use to select the active funds on our Funds List has been the same for several years. There are three main steps involved:

Step 1: Assessing risk and return

One of the key criteria that we assess is the relationship between risk and return. What this means is we compare the amount of risk the fund manager has taken to achieve the expected returns. We want to make sure fund managers aren’t taking too many risks in trying to get you good returns on your investment. We also analyse how consistent the fund manager's approach and past returns have been, as well as the level of experience of the rest of the fund's investment team.

Step 2: Our due diligence

The next stage of the process involves extensive manager due diligence and can be divided into two distinct steps: investment due diligence, and operational due diligence.

  • Investment due diligence looks for the best-in-class managers and to do this we use our ‘5P’ research framework where we assess and score the manager in five key areas: Parent, People, Philosophy, Process and Performance. A good score in each of these five areas is critical to the likelihood of future success. Read more about this selection process here.
  • Operational due diligence aims to assess and mitigate business and operational risks. This means we will look at whether the fund manager has the business resources and processes needed to support the investment activities, and the operational know-how needed for them to deliver and sustain the investment strategy.

Step 3: Selection approval process

Our team of investment professionals then comes to a joint decision about whether the fund deserves to be included on our list. This helps us make sure our decisions are consistent and free from individual bias.

Once a fund has been selected through our investment research, we then make sure we are able to offer you the best share class we can, so that as little as possible of your investment is eaten up in fund charges.

Making our selected funds into a list for you to use

We take the individual funds we’ve selected and group them together into easily understandable sectors of funds with a similar investment focus. This might be by the type of asset they buy, such as bonds or shares (equities), or perhaps where the companies they buy are based, like Europe or Japan. The sectors in our list cover the areas of investments we believe are key to building a balanced portfolio.

While the funds in each sector have the same focus for investing, they don’t all take the same approach to how to achieve the goal of growing your money. So after choosing a sector, take a dig into each fund to see which suits you best. To help you we’ve got a handy commentary that gives you a quick summary of the manager and why we like their fund.

Our list includes funds from the key sectors for building a diversified portfolio, so remember to spread your money between these and bear in mind which funds have a higher investment risk and the effect this will have on the balance of your portfolio. We’ve noted the ‘KIID risk score’ next to each fund on the list, but remember to check out what the manager says in the Key Investor Information Document (KIID) itself about the risks of the fund’s investment approach, and also bear in mind that the risk score can change over time.

Our list is constantly updated

As we’re constantly monitoring and reviewing the funds in our Active list we may add or remove funds at any time. For a quick view of what we’ve added or removed recently, find out more about these changes to our funds list.

Active funds which are included in our list are ones we currently like, and have a positive view of purchasing. There are a number of reasons why a fund may be taken off the list, and if a fund is removed, we’ll always tell you why we’ve done it; it doesn’t normally mean we believe that fund is no longer worth holding. You can then make your own decision as to whether you want to stay invested in the fund or sell it.

So why might a fund be removed from the list? It may be because there’s now a different fund we prefer for new investments, perhaps because the original has become very large, for example. Or, something about the fund has changed, such as the manager or the way it’s run. Or it might be because we no longer feel it’s needed on the list or fits with the overall selection of ‘core funds’.

Making your choices

We’ve rigorously reviewed the funds we’ve chosen for the active list and as well as making the list available on Smart Investor, we use these funds in other areas of our investment business too.

However, it’s essential that you carry out your own due diligence to work out if these funds have a part to play in building your own balanced portfolio. You should always review the information the fund managers provide on their strategy and the risks of the fund. These are outlined in the Key Investor Information Document (KIID), which you’ll find on each of our fund fact pages.

Remember, Tracker or Barclays Multi-Manager funds options, go through different selection processes appropriate to the types of funds they are.

Take a look at the funds that have earned a place on our Funds list.

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