Wrapping up a package to include the top performers

People commonly talk about investing in a PEP. But strictly speaking, a personal equity plan is simply a form of packaging for other investments. Most of the PEPs that you see advertised are packaged plans that invest in shares through unit and investment trusts.

If you want to understand how well particular PEPs are performing, you need to look at the underlying assets.

But while most PEPs invest in unit trusts, not all unit trusts can be held in a PEP. This is because the rules allowing up to pounds 6,000 a year in a general PEP apply only to investment "in qualifying assets", in simple terms UK and European shares.

Unit trusts are grouped into various sectors, depending on where and how they invest. Some of these unit trusts, such as funds investing in the US or the Far East, do not qualify under the PEP rules.

The table alongside shows the top-performing unit trusts in some of the most popular sectors, based on performance over the past 12 months.

More detailed tables, ranking all the funds in all the sectors, are given on the unit trust page in the Saturday editions of the Independent. This page also includes the sector averages table, summarising the performance of each sector.

Over the past 12 months, the top-performing funds have been those investing in smaller UK companies, and the general UK growth sector.

Whatever type of packaged PEP is chosen, the underlying fund should always be examined to make sure that it does fit with your long-term aims as an investor. But always remember that, like any other stock market investment, a PEP's value will rise and fall in line with the performance of companies and of the stock market. So you should regard PEPs as a long- term investment and have emergency funds available in a savings account.