The other day, a novice investor asked me to explain what a fund is and how it works. Automatically, my brain jumped to words like “wrapper” and “vehicle”, which although apt. can be misleading and also germinate terror in those that are new to investing; terror mainly induced by assumptions of sky-high fees, suspended dealing and a lack of transparency. In most cases (despite the recent media frenzy), this is far from the truth, but nevertheless I thought I’d try a different approach.

“Funds are like pizza… rather than buying all of the different ingredients, you just buy a slice of the pizza.” I concede that this is not a particularly traditional (or professional?) analogy but at least she understood what I meant!

Just like a pizza, a fund can come in lots of different flavours, lots of different sizes and can take a varying amount of time to be delivered. (In fact, the only certainty of pizza is that you’ll burn off the roof of your mouth with the first bite.) At Ravenscroft, we are appointed Investment Manager of several funds – for the purposes of this article I will focus on just two to highlight how different funds can be.

Huntress Global Blue Chip Fund: this is a direct equity fund that will invest into 25-30 multinational businesses; each of which is aligned with one or more of our investment themes. Our selection process identifies financially strong and prudent businesses, which are built on growing global revenue streams, and brands that you trust, as well as strong management teams who are focused on increasing shareholder value. We intend to invest into these companies for the long-term, allowing for the combination of our themes and the quality of the companies to generate returns for our investors. The Fund is extremely liquid and investors can buy and sell shares in the pizza Fund on any business day – this is appropriate because all of the underlying companies are extremely liquid; in fact they are some of the biggest companies in the world. Current holdings include Walt Disney, Alphabet, Novartis and Relx – it has exposure to an array of sectors and provides investors with an extremely diverse global portfolio.

Bailiwick Investments: a diversified portfolio of investments, principally in businesses, property and assets situated in, registered, headquartered or managed from the Channel Islands, or via which there is a material Channel Islands' interest. The wonderful thing about Bailiwick is the tangibility of the assets – island residents can invest into businesses that they can see in operation and whose services they may utilise regularly. Bailiwick Investments has provided many local businesses with an opportunity to obtain finance in order to grow or develop their businesses rather than, or in addition to, utilising more typical routes such as bank lending. The current portfolio includes names such as Sandpiper, Guernsey recycling and Oatlands Village. This Fund is traded on a matched bargain basis – i.e. buyers are matched with sellers when each becomes available. This is a much more appropriate structure for the underlying investments as the holdings are relatively smaller and less liquid than those in the Blue Chip Fund.

As I alluded to earlier in the article, funds have gotten rather a bad press of late, but I would urge you not to tar all funds with the same brush. They can be a wonderfully simple, cost effective way to access an array of investments. They can be very transparent and accessible if you use the right manager. They can also serve other purposes like helping businesses to grow; facilitating management buy outs or launching their services in new jurisdictions. As always, we would urge all investors to know exactly what they own and why – we want to make sure that everyone gets the pizza they ordered and not one with pineapple (unless you like pineapple on your pizza, in which case I’m just not sure that we can be friends).