How to Read a Fund FactsheetStart here
Two pages, forty numbers, and roughly six that decide the outcome. A line-by-line walkthrough of what to read, what to ignore, and what is missing on purpose.
Read it in this order
- A factsheet is a marketing document that happens to contain regulated data. Reading it top to bottom means reading the marketing first.
- The order that works: identifiers → costs → what it actually holds → how well it tracked → structure → performance. Performance is last on purpose.
- Budget three minutes. Six numbers decide almost everything, and they are all findable in that time once you know where they hide.
1. Identifiers: which fund is this, exactly
- ISIN, not the name. One fund commonly has six share classes with different currencies, distribution policies and fees. The name is often identical; the ISIN never is.
- The suffix tells you the policy. Acc accumulates income inside the fund, Dist pays it out. Hedged means currency-hedged share class, with its own ongoing cost.
- Domicile matters for tax and protection. A fund domiciled in one country and sold in another is subject to the first one's rules — including withholding tax on its own dividends, which never appears as a fee.
- The regulatory label (UCITS in Europe, and equivalents elsewhere) is a structural promise about diversification limits, liquidity rules and leverage caps. See investor protection.
2. Costs: the ongoing charge is a floor, not a total
$$ \text{True cost} = \underbrace{\text{OCF}}_{\text{disclosed}} + \underbrace{\text{transaction costs}}_{\text{usually not}} + \underbrace{\text{spread}\times 2}_{\text{yours}} + \underbrace{\text{platform \& FX}}_{\text{yours}} $$
- Ongoing charge (OCF/TER) is standardised and comparable between funds of the same type. Use it — and do not assume it is complete.
- The fund's own trading costs sit outside it. A high-turnover strategy can add 0.2–1% a year that no headline number shows.
- Performance fees, where present, need the hurdle and the high-water mark read together. A fee on gross performance above a cash hurdle is a very different thing from one above a benchmark.
- Securities lending revenue and how it is split is disclosed by good providers and buried by others. It can be worth several basis points and it is being generated with your assets — see securities lending.
3. What it actually holds
- Top ten holdings and their combined weight. A "global" fund with 35% in its top ten is a concentrated bet wearing a broad name. This single line reveals more than the strategy description.
- Number of holdings against the benchmark's. Far fewer means active concentration; roughly equal means the deviation is in the weights.
- Sector and country splits — and whether they are of the fund or of the benchmark. Factsheets frequently show one and label it ambiguously.
- Currency exposure is not the same as listing currency. A fund priced in euros holding US equities is a dollar exposure. Unless it says hedged, it is not.
4. Tracking: the number that grades an index fund
- Tracking difference is the realised gap between fund and index over a period. It is the only cost measure that captures everything at once — charges, taxes, trading and lending revenue.
- Tracking error is the volatility of that gap. Low tracking error with consistently negative tracking difference means the fund reliably lags. That is worse than an erratic one that keeps up.
- Run both through the tracking-difference decomposition: if the unexplained residual is large and negative, something is happening in the implementation that the fee sheet does not describe.
- Replication method: physical full, physical sampled, or synthetic. Each has a different failure mode — see physical versus synthetic.
5. Performance: read it last, and read it sceptically
- Check the period against the strategy's life. Five years of data on a strategy that has existed through one regime is one observation, not five.
- Discrete calendar years beat cumulative charts. A cumulative line hides which single year produced the result.
- Compare against the same index the fund uses, and check whether that index is price or total return. Against a price index, any fund receiving dividends looks brilliant.
- Past performance sections are regulated boilerplate because the evidence for their predictive value is weak. Costs, by contrast, are stable and predictive — which is why they come earlier in this list.
What a factsheet never tells you
| Missing | Why it matters |
|---|---|
| The manager's own money in the fund | The single cleanest alignment signal, almost never disclosed |
| Capacity | A strategy that works at €100m may not at €5bn |
| Turnover, in many jurisdictions | Drives the transaction costs that sit outside the OCF |
| Counterparty detail for synthetic funds | Who the swap is with, and what collateral secures it |
| What the fund did in the worst month | Drawdown behaviour matters more than average return |
The three-minute checklist
- ISIN and share class — is this the version being sold to you?
- Ongoing charge plus tracking difference — what does it actually cost, measured rather than stated?
- Top ten weight — is it as diversified as the name implies?
- Currency — hedged or not, and is that the decision you meant to make?
- Replication — physical or synthetic, and are you comfortable with that failure mode?
- Size and age — a very small or very new fund carries closure risk, which forces a sale at a time you did not choose.
Information and education only. This page explains how to read a document type. It is not advice, not a recommendation of any fund or fund type, and no checklist can substitute for the fund's own prospectus and key information document.