More choice if you know where to look

If you have been making annual investments into PEPs and, more recently, ISAs for many years, you are probably weary of the stream of reports and statements that drops through the letterbox.

If you have been making annual investments into PEPs and, more recently, ISAs for many years, you are probably weary of the stream of reports and statements that drops through the letterbox.

Not only is there too much paperwork to marshal, but it does not all come at the same time, so you never receive anything like a coherent, up-to-date snapshot of your whole portfolio. And the burden of paper-churning can also fall on you, as changes of circumstances - a new address, for instance - involve writing to every company.

More manageable personal admin is one of several reasons why private investors who are happy to make their own fund choices can benefit by using an online fund supermarket, instead of investing via the fund managers direct (or via a conventional broker). Fund supermarkets were introduced in the US. The first launched in the UK was Fidelity's FundsNetwork, in 2000.

FundsNetwork alone has made over £3 billion of sales, while the number of funds offered has grown from 250 to more than 900.

When you buy an ISA fund from a fund manager, the ISA tax wrapper for the investment is provided by the manager, so you can only hold funds offered by that investment house within it. When you buy through a fund supermarket, the ISA account is provided by the supermarket itself, rather than by any individual manager.

Paperwork is simplified, as is investment monitoring: you receive a single half-yearly statement, detailing all your transactions and the current value of the entire portfolio invested through it.

If you want to view progress between statements, you can check online (where it is easy to see what underlying investments are held in the individual funds you own, and to ensure your portfolio is properly diversified).

Diversification becomes a cinch; because the tax wrapper is administered by the supermarket, it is possible to split a single year's ISA investment between funds from several managers.

And choice is huge. Fidelity FundsNetwork offers more than 900 funds from 56 managers, while the other market leader, Cofunds (accessed via discount brokers and IFAs), offers almost 800 funds from 52 investment houses.

Most supermarkets (and the discount brokers who deal for their clients via Cofunds or FundsNetwork) take stress out of diversification by creating a range of model portfolios.

Switching between funds is much easier via a supermarket account; it is also free or very cheap. If you bought directly through a fund manager, typical front-end charges of 4.5 to 5.5 per cent would be deducted from your initial investment, as well as an annual management fee. Buying through a fund supermarket will typically bring the initial charges down to about one per cent or less.

Fund supermarkets do have some limitations. Basically, they only provide access to unit trusts and OEICs.

If you want to hold a broader range of investments in your ISA, you will need to look for a self-select ISA, for which you will pay an annual admin fee, as well as any annual charges for the underlying investments.

'We like to be independent'

Sarah Berglas, 29, works part-time for a pharmaceutical company in London, and her Fidelity FundsNetwork portfolio includes a couple of healthcare funds from Schroder and Fram-lington. Her husband, Morrie, a computer chip designer, does most of the research but they make the selection of funds together. She says: "We use a fund supermarket because we like to be independent and form our own judgments. FundsNetwork gives access to a huge number of funds and companies and also provides background information, yet all the funds are held in a single account, so it's easy to see what's going on. We are also able to phase in our investments."