The Big Exchange Fund Bundles (Pt 1)
This is a three-part series on The Big Exchange Fund Bundles to give some deeper insight into how we package some of our 40 actively managed funds for investors who would prefer not to pick n’ mix. This week we will be looking at what the bundles are and why they were developed.
First, we want to give you a jargon-buster warning. As part of our mission for financial inclusion, we always aim to write in a language everyone can understand. When we do that we are still talking to the most sophisticated investors here too but we link to our Glossary, which has is re-explained financial terms, whenever we can.
What is a fund bundle?
A bundle is a selection of investments available on The Big Exchange wrapped up in a ready-made way for you to invest and made to match the risk you feel you are willing to take with your money. When you choose a bundle you are investing in multiple different individual funds. We don’t manage that bundle of investments for you over time, but we put you on the path.
Why did we make them?
The Big Exchange set out to create bundles to give people hassle-free access to a mix of investments, whether it’s because they were too busy to manage their fund choices themselves or because they were not investment experts. But, while this sounds simple, it’s not dumbing it down.
Cautious, Balanced and Adventurous
The three bundles have been put together using a sophisticated model that looked at the historic fund performance, the volatility, and a number of other financial indicators to give three different risk profiles that serve the needs of different savers and investors.
We also put together an independent Investment Committee made up of trusted, experienced investment professionals to monitor, oversee and ensure the bundles are doing what is expected of them now and into the future. (We will go into more detail on our team, the process and the investment committee in another post).
The Bundles are effectively made up of a mix of two types of investments or asset classes:
⁃ Fixed income: where the funds invest in bonds (loan arrangements) of companies. The company then aims to pay back a fixed amount on a regular basis (a bit like when you get a loan). Fixed income funds are typically less risky than equity funds. and;
⁃ Equity investments: where the funds invest in the shares of publicly-listed companies whose value is dependent on the share price in the market.
Fixed income investments are generally seen as less risky than equity investments. As such, they typically offer lower potential returns and lower potential for loss than equity investments. By mixing these two types of funds together in different bundles, we can create a mix of risk and return that meets the different profiles of cautious, balanced, and adventurous.
Can we mix it? Yes we can.
There is no extra fee for investing in a bundle and we want it to be an accessible way for people to invest in multiple funds that contribute to people and the planet.
Now, some more about the individual bundles.
THE CAUTIOUS BUNDLE
This cautious bundle gives you a mix of 10 different funds with the aim to give investors half of the risk and the return of global public equity markets. A very simplified example of the aim of the cautious bundle is that, if global markets go down 3%, the aim is that the cautious bundle would only have half of the hit. The same goes for if the market goes up 2%.
It is a 50/50 mix of equities and fixed income. This means that half of your money will go to be invested in publicly listed companies on stock markets both in the UK and Globally, half will be invested in Bonds (loan arrangements)
THE BALANCED BUNDLE
This balanced bundle gives you a mix of 10 different funds with a 75/25 mix of equities to fixed income. The aim is to give investors three-quarters of the risk and the return of global public equity markets. Three-quarters of your investment will be in company shares both in the UK and Globally, and one quarter will be invested in Bonds (loan arrangements). It aims to be the mid-ground between the cautious and the adventurous.
Using the same example, the balanced bundle would take 75% of the hit if global markets went down 3%. The same goes for if the market goes up 2%, the Balance bundle could return 1.5%
THE ADVENTUROUS BUNDLE
This adventurous bundle gives you a mix of 8 different funds with 100% in equities and no fixed-income investments. The aim to match the risk and return of global public equity markets. Your investment will be in company shares across the globe, including Emerging Markets which include countries that show typical characteristics of high potential growth and high development, but are not as established as other markets such as the United States for example.
Using the same example, the balanced bundle would take all of the hit if global markets go down 7% and potentially more. The same goes for if the market goes up 2%, the Balanced bundle could return 2% or more.
The ready mix just for you
By investing in multiple different funds within one bundle, you care about,. and here’s how it’s called in the City “diversifying your money to manage market risk”.
Effectively, what this means is that you are mixing where your money is invested so that you spread (and therefore reduce) the chances of your pot being affected too much by a negative (or positive) event. There’s a pretty well-told phrase about putting eggs in baskets that sums this up pretty well… It’s a game investor OG’s like Warren Buffet play by. So, just because you choose to invest in funds that make a positive contribution to people and planet, it doesn’t mean the tried and tested rules of investing don’t apply.
While our bundles of funds are simply labeled to reflect risk, and their positive impact is highlighted with a basic ‘gold’, ‘silver’ or ‘bronze’ medal, there is a lot going on in the background to make sure that you get a good selection of funds to help you on your investment journey with us. You can start from as little as £25 a month or transfer your existing investment account into one of our bundles today!
Next week we’ll show research on how aiming for positive impact does not mean having to sacrifice potential returns.
So in summary, what do you get? You get:
⁃ Access to multiple funds put together and monitored by an independent Investment Committee made up of trusted, experienced investment professionals.
⁃ A choice of Cautious, Balanced or Adventurous based on how much risk you want your money to take
⁃ Diversification (not putting your eggs in one basket)
⁃ A hassle-free way to get invested
… and of course, all the funds within the bundles are rated for their positive contribution to people and the planet.
What makes it special?
⁃ Our investment committee put these together for our customers to choose from for no extra fee
⁃ Minimum investment of £25 a month spread out over 8 funds which give you access to active funds at an accessible entry point.
⁃ All the fund managers have agreed the lowest available fee
⁃ Every fund has passed through our methodology and receives a medal.
Ready to switch your ISA to The Big Exchange and need no more convincing? Go to www.bigexchange.com. Switch your ISA before the April 5th deadline and give the planet a lifeline!
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