Tracking the stock market

Q I've heard a lot about 'tracker' funds. What are the advantages of using these rather than more traditional managed investment funds?

A Tracker funds are part of an investment group referred to as 'passive' funds. These funds are designed to 'track' the performance of an investment market or index. For example, an index tracker fund might aim to track the performance of the FTSE 100 index - an index which represents the top 100 companies (by size) in the UK.

Investors are becoming more interested in tracker funds as they start to understand that actively managed funds are failing to consistently outperform their targets. By using a tracker fund instead, it is possible to gain access to the same investment returns as the underlying index (less charges) but at a much lower cost.

Tracker funds in the UK are still more expensive than those available in the US, where the market for this sort of investment is more established. Over time we hope to see the introduction of a wider range of tracker funds at much lower charges, offering investors far greater choice.