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Best UK Mutual Funds

Looking to invest in a UK mutual fund? Here we discuss the best mutual funds in the UK trading space and provide helpful tips on how to invest.

Mutual funds are perfect for those of you that want to invest in the financial markets but you don’t quite know where to start. They are also ideal if you don’t have the time to manage your own investments. By investing in a UK mutual fund, the provider will buy and sell assets on your behalf, so you can sit back and let them take care of your investing for you.

In this guide, we explore the ins and outs of how mutual funds work, taking a look at the best UK mutual funds of 2022 and reviewing the top investment platforms.

What are Mutual Funds?

In its most basic form, a mutual fund allows you to invest money with a large-scale investment house, which in turn will buy and sell assets on your behalf. The mutual fund in question might decide to invest exclusively in traditional stocks, or other assets such as bonds, indices, and ETFs. Either way, the entire end-to-end investment process is passive from your point of view.

Not only does this suit beginner traders that have little to no experience of the financial markets, but it’s also ideal for those that don’t have the time to actively manage their own investments. Instead, you simply need to meet a minimum investment amount, deposit some funds, and the provider will take care of the rest.

In terms of how you make money, this works the same as if you had purchased the assets yourself. For example, if your chosen UK mutual fund invests in stocks and buy shares, you will receive your share of dividend payments. Similarly, if the fund holds a basket of bonds, you will receive your share of coupon payments.

You also stand to make money through capital gains, which is where the assets held by the mutual fund increases in value. For example, if the fund purchases a bunch of Facebook stocks and then sells them for more than they paid, you will receive your share on the profits. With that said, capital gains are represented in the share price of your mutual fund, so unlike dividends or bond coupons, you won’t actually receive this in the form of a payment.

Types of Mutual Funds

Although all mutual fund providers allow you to invest in the financial markets in a passive manner, there are a number of different types to choose from.

  • Equity Mutual Funds

The most popular mutual fund type in the UK is that of an equity fund. As the name suggests, the mutual fund provider will invest exclusively in traditional stocks. This means that you stand the chance of making money via regular dividend payments as well as capital gains. There are hundreds of UK equity mutual funds to choose from, as each provider will focus on a specific market.

For example, while some mutual funds target UK companies listed on the London Stock Exchange, others focus on firms listed in the US. In other cases, the equity mutual fund might hold a diversified portfolio of stocks that covers several international markets.

  • Bond Mutual Funds

As it says on the tin, bond mutual funds invest primarily in bonds. Once again, this can cover a vast range of markets. For example, while one provider might decide to buy and sell low-risk government bonds, another might prefer higher risk bonds from the emerging markets.

Some bond mutual funds contain a full range of bond types from both the government and corporate spaces. One of the main benefits of bond mutual funds is that they allow you to potentially earn passive income in the form of regular coupon payments.

  • Money Market Funds 

If you don’t have an appetite for risk, then it might be worth considering a money market fund. In a nutshell, this particular fund type invests in low-risk government securities. This includes the likes of US Treasuries and UK Gilts.

In some cases, money market funds also hold high-grade, short-term debt instruments. This is where the underlying security is backed by a large-scale corporation or financial institution.

  • Balance Mutual Funds

Can’t quite decide which sector to target? If so, it might be worth opting for a balanced mutual fund. This is where the investment funds provider will invest in a range of asset classes. For example, the fund manager might allocate 60% to blue-chip stocks, 25% to corporate bonds, and the remaining 15% in government securities. This option is best suited for investors that want to diversify as much as possible. 

5 UK Mutual Funds to Consider in 2020

With hundreds of UK mutual funds to choose from, knowing which provider to go with can be challenging. Not only do you need to assess the specific sectors that you want to gain exposure to, but you also need to assess what risk level you feel comfortable taking.

To help you out, we’ve listed five of the best UK mutual funds for 2020 and provided some background on each.

1. Fundsmith Equity I Acc

Led by Terry Smith, Fundsmith Equity is one of the best performing mutual funds of recent years. The overarching focus of the fund is to invest in strong blue-chip equities. Much of the portfolio – which has just over £18 billion under management – contains US-listed stocks. This includes bulky holdings in Microsoft, Paypal, Philip Morris, and Facebook. Terry Smith also has some smaller stock holdings in the UK, Denmark, Spain, and France.

In terms of annualized returns, the fund made 17.11% in 2016, 32.94% in 2017, and 11.29% in 2018, respectively. 2019 and 2020 saw returns of 18.28% and 8.47%, respectively. When it comes to the specifics, the fund requires a minimum upfront investment of £1,000 if you go direct with the fund. However, if you use a third-party broker you can normally get started with much less.

2. Vanguard LifeStrategy 80% Equity Fund A Acc

If you’re looking to diversify across both stocks and bonds, it might be with considering the Vanguard LifeStrategy 80% Equity Fund A Acc. The heavyweight fund provider has a basket that consists of 80% in blue-chip stocks, with the balance held in bonds. Regarding the former, this will include a mixture of UK and international stocks. A small proportion will be held in slightly riskier companies based in the emerging markets.

This particular option is suited for those of you that seek a combination of growth and passive income. This is because you stand the chance of making capital gains through the 80% stock holding, and regular coupon payments via the 20% bond basket. When it comes to performance, the Vanguard LifeStrategy 80% Equity Fund made increased its net asset value (NAV) by 5.90% and 8.05% in 2018 and 2019, respectively. The fund grew by a whopping 23.52% the year prior.

3. HSBC FTSE 100 index C Acc

The HSBC FTSE 100 index C Acc is a mutual fund that aims to provide long-term growth on the FTSE 100. It recommends a minimum holding of 5 years to ensure the portfolio rides out any shorter-term volatile waves. Across 100 different firms, the fund covers virtually every sector in the UK market. This includes financial services, basic materials, energy, consumer defensive, and health care.

As such, you stand the best chance of possible of creating a highly diversified portfolio of UK companies without needing to worry about buying and selling stocks yourself. Many of the companies that make up the fund are dividend-paying, so you could potentially blend capital gains and income.

4. Fidelity High Yield Factor ETF

If you’re more interested in a bond-only mutual fund, it might be worth checking out the Fidelity High Yield Factor ETF. In the vast majority of cases, the fund manager will allocate 95% of the basket into fixed income bonds from the corporate investment space. The portfolio is slightly riskier than other bond portfolios in the market, as the vast bulk are rated BBB or BB. In return, this does come with more attractive bond yields.

5. Lindsell Train Global Equity

The Lindsell Train Global Equity is a mutual fund that targets a range of blue-chip companies, both in the UK and internationally. Domestically, this includes the likes of Unilever, Diageo, RELX, and the London Stock Exchange Group.

Internationally, this includes Heineken in the Netherlands, Nintendo in Japan, and Disney in the US. All in all, this particular mutual fund is ideal if you want to hold a diversified portfolio of equities across various stock exchanges.

Where to Invest in UK Mutual Funds

Once you have found a mutual fund that you like the look of, you generally have two options. You can either invest directly with the fund provider, or go through a third-party broker. Interestingly, it usually works out cheaper to go through an online broker, as they typically get preferential rates. We also find that online brokers allow you to invest with much smaller amounts.

With this in mind, below you will find the top online brokers that give you access to some of the UK’s best performing mutual funds in the cheapest, safest, and most convenient way.

1. Hargreaves Lansdown - Traditional UK Mutual Fund Provider

Hargreaves Lansdown is one of the most trusted online stock brokers in the UK trading space. Although the platform is generally quite expensive, it is actually very competitive in the mutual fund department. In fact, you won't be charged any dealing charges at all.

Instead, Hargreaves Lansdown will charge you an annual maintenance fee of 0.45% the amount you invest. What we also like about the broker is that you will have 2,500 different funds to choose from. In terms of getting started, you can kick off your mutual funds investment from just £100, or commit to a regular payment of £25 per month.

Additional benefits of choosing Hargreaves Lansdown include perks like helpful guides, an investment calculator and investment seminars. If you want to invest in mutual funds on your mobile, you can download the Hargreaves Lansdown app.

Platform Charge: £0
Fund dealing:
0.45% annual fee
Min investment:
£100 lump sum or £25 per month
Transfer out fee:
Payment methods:
Debit card, UK bank transfer

Our Rating

  • More than 2,500 funds
  • £0 dealing charge
  • Excellent reputation
  • 0.45% annual fee
  • No e-wallets
There is no guarantee you will make money with this provider.

2. Cavendish - Great for First-Timers

Cavendish is a UK-based investment platform that gives you access to traditional stocks and shares, ETFs, and mutual funds. The broker is best suited for those of you that are just started out in the world of online investments, as it's tailored to the newbie trader.

You will need to pay an annual platform charge of 0.20% per year, and a further 0.05% 'ongoing' fee. After that, you then need to pay an annual maintenance fee, which can vary depending on the mutual fund you go with.

With over 3,500 funds from more than 150 providers, investors are spoilt for choice at Cavendish. With an intuitive platform that provides a smooth user experience, helpful customer service and a comprehensive news section, Cavendish is a great place to invest in the UK's best mutual funds.

Platform Charge: 0.20% per year + 0.05% ongoing fee
Fund dealing:
Depends on the fund you invest in
Min investment:
Transfer out fee:
Payment methods:
Debit card, UK bank transfer

Our Rating

  • Great for newbie investors
  • Over 35000 funds to choose from
  • No transfer out fee
  • Confusing fee structure
  • No live chat
There is no guarantee you will make money with this provider.

3. Vanguard - World's Largest Mutual Funds Provider

The world's largest provider of mutual funds, Vanguard is a USbased investment platform with more than 40 years' experience and is a great choice for UK investors looking to invest in mutual funds.

You can invest in over 70 mutual funds at Vanguard, with plenty of variety and funds covering assets from all over the world. The funds are quite competitive, with an average ongoing fee of 0.20% and an account fee of 0.15% per year, capped at £375, and there's no transfer fees or dealing charges to worry about.

There's a range of educational materials, news and insights at Vanguard, so it's ideal if you want to build up your knowledge. As well as many of the best mutual funds, this provider also offers ETFs, ISAs and pensions.

Platform Charge: 0.15% per year + 0.20% ongoing fee
Fund dealing:
Min investment:
£500 for single investments, £100 for monthly investments
Transfer out fee:
Payment methods:
Debit card, UK bank transfer

Our Rating

  • World's largest mutual funds provider
  • Good variety of funds to choose from
  • Educational materials
  • High ongoing fees
There is no guarantee you will make money with this provider.


In conclusion, UK mutual funds are great for the newbie investor, as you’ll be gaining exposure to the financial markets without needing to have an ounce of knowledge. Instead, you simply invest a lump sum with an online broker, choose a mutual fund that you like the look of, and that’s it – the provider will take care of the rest. The process is also ideal if you don’t have the time to research and invest yourself, and you can even do it all on your mobile via an investment app.

Mutual funds are suited to investors of all shapes and sizes. Whether you are looking for regular income in the form of a bond fund or long-term growth with an equity fund, there’s something to suit most taste buds. If you do want to get started with a fund investment today, the end-to-end process takes just minutes with our recommended investment platforms.


What are mutual funds?

Mutual funds allow you to invest money into the financial markets by pooling your money together with other investors via a mutual fund provider. The fund provider will buy and sell assets on your behalf, in return for a small fee.

How do I invest in mutual funds in the UK?

There are typically two ways to invest in a mutual fund. You can do this directly with the fund provider, or through an online investment platform. The second option is typically more favourable if you want to start off with small amounts, and in most cases it's cheaper.

Can I make money from investing in mutual funds in the UK?

There is never any guarantee that you will make money in the financial markets, no matter what investment stream you take. With that said, mutual funds are run by large-scale financial institutions that have a long-standing track record of making consistent gains, so they're generally considered a safe investment.

How much money do I need to invest in mutual funds?

This depends on the fund provider or online broker that you go with. You will typically need at least £100 to get started with mutual funds investment, although it can be more.

How are mutual funds different to exchange-traded funds?

The two are actually very similar, as they both allow you to invest in a group of assets through a single trade. With that said, ETFs are traded throughout the day like stocks, whereas mutual funds can only be sold and bought once daily.