While the rest of the portfolio shifts, the top ten holdings of a fund may appear comfortingly familiar
However, should investors be provided with additional information so they can determine if the fund they purchased still exists?
Despite their claims to be long-term investors, active fund managers enjoy trading.
For instance, Terry Smith's flagship Fundsmith Equity fund reported a 51.8% portfolio turnover in the first half of 2026. Smith stated in his letter to shareholders at the halfway point of the year that the fund had begun to increase its holdings in 12 businesses while closing or beginning to close 13 others. That's a lot of activity for a fund whose investment philosophy concludes with "do nothing".
It can be difficult for investors in active funds to monitor their holdings.
Only its top ten holdings are listed in the most recent Fundsmith Equity factsheet (31 July). Additionally, it states that the company name may be withheld until the desired weighting has been accumulated while a position is being developed. That's a legitimate trading precaution, but it's also another reason why monthly factsheets may not be very thorough.
Watch the entire video here: While a top 10 list is helpful, it's more akin to a restaurant's signature dishes than a kitchen inventory. Beyond those ten names, a fund may undergo significant changes, particularly if a number of smaller positions are added or sold.
Since these are typically the largest holdings, many funds only showcase their top 10. Should investors be provided with additional information to better understand the strengths and risks in their portfolio?
Fund holdings: What's required by law.
The precise information that investment funds must reveal about their holdings is not specified by law. However, funds must adhere to the Investment Association's Statement of Recommended Practice as mandated by the Financial Conduct Authority (FCA). These require the annual and half-yearly reports behind the headline factsheet to include a complete portfolio statement that lists all investment assets and liabilities.
Although the presentation rules vary depending on the type of asset, the general idea is the same.
It's all about timing. Half-yearly reports can be released up to two months after the half-year, and annual reports can be released up to four months after the end of the year. By the time the annual report deadline arrives, the most recent complete picture may be almost ten months old due to the six-month gap between the snapshots.
However, investors can better understand their market exposure and prevent over-concentration by learning more. However, are they always beneficial?
The top 10 is not a rule, but a convention.
The most recent factsheet is usually simple to locate if you want to see a fund's top ten holdings. However, finding more than the top 10 might be more difficult.
The regulator is not the reason for only publishing the top ten. The FCA does not mandate that funds publish a factsheet on a monthly basis, much less specify which of the top ten formats they must use. The publication of the top 10 is an industry custom rather than a regulatory assessment of the amount of information that investors should see.
The fund's long report, which must include a list of all investment assets and liabilities, contains anything that goes beyond those ten holdings. Compared to a factsheet, it requires more searching, but that's where the whole picture is.
Changes in the top 10 misses can be found in that complete list. It can demonstrate whether the portfolio still reflects the manager's declared methodology, whether concentration has changed, and whether a number of funds you own are increasingly holding the same businesses. Additionally, smaller positions may reveal bets of a sector, nation, or company that the headline names overlook.
Not every new holding warrants an inquest just because the entire portfolio is visible. Investors who second-guess every trade may cause their own issues, and active managers are compensated to make decisions.
Examining whether the fund still resembles the one you selected is a different matter from questioning each individual trade.
Transparency of funds.
Generally speaking, increased transparency is viewed favorably. It does, however, have drawbacks. For example, if a manager discloses an incomplete trade too soon, other investors may trade ahead of it, replicate the strategy, or push the price against the fund.
The scholarly data indicates a trade-off rather than a straightforward argument for increased transparency. US mutual funds that switched from semi-annual to quarterly disclosure following the 2004 SEC rule were examined by Parida and Teo (2018). After that, funds that had done well under the previous system lost roughly 22.5 basis points, or 0.225 percentage points, every month. Funds with illiquid portfolios were especially affected.
Additional research reveals more disadvantages. Agarwal and associates. (2015) discovered that requiring portfolio disclosure could increase stock liquidity, but at the expense of certain funds' performance. More frequent reporting has been connected by Xin, Yeung, and Zhang (2024) to window dressing, which is rearranging a portfolio right before it is scheduled for viewing. Neither of these US studies explicitly illustrates the impact on UK funds of monthly disclosure of near-current holdings.
Investors may get a false sense of security if there is complete transparency. The Woodford Equity Income Fund's entire portfolio from its 2014 launch was made public by Woodford Investment Management, which received high appreciation for doing so. However, the fund was suspended in 2019 and closed shortly after due to a prolonged period of terrible performance.
Full holdings are still helpful because they can present uncommon or unquoted viewpoints and raise more difficult queries than a headline list ever could.
They are unable to provide investors with information about how easily assets could be sold for redemptions, how ambiguous valuations were, or whether governance would withstand pressure. While transparency can enhance due diligence, it cannot take its place.
How to verify your financial holdings.
You might have to do your own research to find out what is in your fund. Start by visiting the manager's webpage. Find the most recent annual or half-yearly report and look for "portfolio statement" if there isn't a spreadsheet or report.
Don't take it too seriously if it's difficult to locate. Consider it an information disadvantage rather than a sign of poor management or an automatic sell.
Verify the publication date and the holdings date after you have the complete portfolio. Months may pass between them.
Next, contrast the most recent complete portfolio with the prior one. Keep an eye out for new and departing positions, shifts in sector or geographic exposure, concentration changes, and increasing overlap between funds. Instead of attempting to reverse-engineer every trade, you are seeking material change.
Managers need enough time to complete trading without being outpaced, and investors need enough visibility to identify significant change. It makes sense to start by making a current, comprehensive portfolio easily accessible.
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