Share classes explained

These educational articles are designed to help our customers’ understanding of finance and investing.

When looking at lists of funds to invest in, it can be confusing to see the same fund name followed by a different letter each time. These letters indicate the fund’s specific share classes. You can often tell these different versions by a single letter included in the fund name, or sometimes with something more descriptive, for example ‘accumulation’ or ‘income’.

Why do funds have different share classes?

Different share classes of the same fund are created to suit each type of buyer, for example, individual investors or institutional investors such as pension funds or charities. This means that the share classes are likely to have different costs and also minimum investment levels.

However, all share classes of a fund will invest in the same portfolio of securities and will have the same investment objectives and policies.

Do the share classes perform the same?

Since each class has different fees and expenses, each will likely have different performance results. These results are sometimes only subtly different, but can be more marked, depending on the elements influencing different share classes.

Costs can affect the long-term returns for investors, but costs are not the only element that varies from share class to share class.

Share classes can be bought in different currencies. For example, a sterling-based investor holding a dollar share class of a fund will be exposed to any rise or fall in the value of sterling versus the dollar. This could be very positive for the investment in some market environments, but extremely painful in others.

Do share classes mean the same across all funds?

Unfortunately not. There is no commonality to labelling since there is no industry standard for different fund share classes, so different fund providers might use similar labels to one another for very different share classes (or vice versa).

Unhelpfully, this means that there is no continuity across fund groups, class B for one fund is not necessarily the same as class B for another fund. ‘B’ is simply used to differentiate the fund from another unit of the same fund in another share class, such as class C or class I for example.

What do the abbreviations Inc and Acc mean in a fund’s name?

If a fund generates an income (such as through dividend payments or coupons on bonds), then the fund provider will usually offer investors the choice of income (Inc) or accumulation (Acc) share classes. The income share class will distribute the income, while the accumulation share class will reinvest any dividends or interest generated into the fund. The latter has a powerful compounding effect over the long term. An investor’s choice of share class will be determined by their need for a regular income from their investment.

Important Information

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All commentary and data is valid, to the best of our knowledge, at the time of publication. This document is not intended to be a definitive analysis of financial or other markets and does not constitute any recommendation to buy, sell or otherwise trade in any of the investments mentioned. The value of any investment and income from it is not guaranteed and can fall as well as rise, so your capital is at risk.

We manage our investment strategies in accordance with pre-defined risk objectives, which vary depending on the strategy’s risk profile.

Portfolios may include individual investments in structured products, foreign currencies and funds (including funds not regulated by the FCA) which may individually have a relatively high risk profile. The portfolios may specifically include hedge funds, property funds, private equity funds and other funds which may have limited liquidity. Changes in exchange rates between currencies can cause investments of income to go down or up.

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