Collective investment scheme
Encyclopedia
A collective investment scheme is a way of investing
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

 money alongside other investors in order to benefit from the inherent advantages of working as part of a group. These advantages include an ability to
  • hire a professional investment manager, which theoretically offers the prospects of better returns and/or risk management
  • benefit from economies of scale - cost sharing among others
  • diversify more than would be feasible for most individual investors which, theoretically, reduces risk.


Terminology varies with country but collective investment schemes are often referred to as mutual funds, investment funds, managed funds, or simply funds (note: mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...

 has a specific meaning in the US). Around the world large markets have developed around collective investment and these account for a substantial portion of all trading on major stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

s.

Collective investments are promoted with a wide range of investment aims either targeting specific geographic regions (e.g. Emerging, Europe) or specified industry sectors (e.g. Technology). Depending on the country there is normally a bias towards the domestic market to reflect national self-interest as perceived by policymakers, familiarity, and the lack of currency risk. Funds are often selected on the basis of these specified investment aims, their past investment performance and other factors such as fees.

Constitution and terminology

Collective investment schemes may be formed under company law, by legal trust or by statute
Statute
A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...

.
The nature of the scheme and its limitations are often linked to its constitutional nature and the associated tax rules for the type of structure within a given jurisdiction.

Typically there is:
  • A fund manager or investment manager who manages the investment decisions.
  • A fund administrator
    Fund administration
    Fund administration is the name given to the set of activities that are carried out in support of the actual process of running a collective investment scheme, whether the scheme is a traditional mutual fund, a hedge fund, Pension fund, unit trust or something in between.Managers of funds often...

    who manages the trading, reconciliations, valuation and unit pricing.
  • A board of directors or trustees who safeguards the assets and ensures compliance with laws, regulations, and rules.
  • The shareholders or unitholders who own (or have rights to) the assets and associated income.
  • A "marketing" or "distribution" company to promote and sell shares/units of the fund.


Please see below for general information on specific forms of scheme in different jurisdictions.

Net asset value

The Net Asset Value or NAV is the value of a scheme's assets less the value of its liabilities. The method for calculating this varies between scheme types and jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...

 and can be subject to complex regulation.

Open-end fund

An open-end fund
Open-end fund
An open-end fund is a collective investment scheme which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders...

 is equitably divided into shares which vary in price in direct proportion to the variation in value of the fund's net asset value. Each time money is invested, new shares or units are created to match the prevailing share price; each time shares are redeemed, the assets sold match the prevailing share price. In this way there is no supply or demand created for shares and they remain a direct reflection of the underlying assets.

Closed-end fund

A closed-end fund
Closed-end fund
A closed-end fund is a collective investment scheme with a limited number of shares. It is called a closed-end fund because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.Typically an...

 issues a limited number of shares (or units) in an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...

 (or IPO) or through private placement. If shares are issued through an IPO, they are then traded on an exchange or directly through the fund manager to create a secondary market subject to market forces. If demand for the shares is high, they may trade at a premium to net asset value. If demand is low they may trade at a discount to net asset value. Further share (or unit) offerings may be made by the scheme if demand is high although this may affect the share price.

For listed funds, the added element of market forces
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...

 tends to amplify
Amplifier
Generally, an amplifier or simply amp, is a device for increasing the power of a signal.In popular use, the term usually describes an electronic amplifier, in which the input "signal" is usually a voltage or a current. In audio applications, amplifiers drive the loudspeakers used in PA systems to...

 the performance of the fund increasing investment risk through increased volatility
Volatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...

.

Gearing and leverage

Some collective investment schemes have the power to borrow money to make further investments; a process known as gearing or leverage. If markets are growing rapidly this can allow the scheme to take advantage of the growth to a greater extent than if only the subscribed contributions were invested. However this premise only works if the cost of the borrowing is less than the increased growth achieved. If the borrowing costs are more than the growth achieved a net loss is achieved.

This can greatly increase the investment risk of the fund by increased volatility and exposure to increased capital risk.

Gearing was a major contributory factor in the collapse of the split capital investment trust
Split capital investment trust
A split capital investment trust is a type of investment trust which issues different classes of share to give the investor a choice of shares to match their needs. Most splits have a limited life determined at launch known as the wind-up date...

 debacle in the UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 in 2002.

Availability and access

Collective investment schemes vary in availability depending on their intended investor base:
  • Public-availability Schemes - are available to most investors within the jurisdiction they are offered. Some restrictions on age and size of investment may be imposed.
  • Limited-availability schemes - are limited by laws, regulations, and/or rules to experienced and/or sophisticated investors and often have high minimum investment requirements. Hedge fund
    Hedge fund
    A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...

    s are often restricted this way.
  • Private-availability schemes - may be limited to family members or whoever set up the fund. They are not publicly quoted and often are arranged for tax- or estate-planning purposes. Private equity fund
    Private equity fund
    A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....

    s are typically structured this way.

Limited duration

Some schemes are designed to have a limited term with enforced redemption of shares or units on a specified date.

Unit or share class

Many collective investment schemes split the fund into multiple classes of shares or units. The underlying assets of each class are effectively pooled for the purposes of investment management, but classes typically differ in the fees and expenses paid out of the fund's assets.

These differences are supposed to reflect different costs involved in servicing investors in various classes; for example:
  • One class may be sold through a broker
    Stock broker
    A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...

     or financial adviser
    Financial adviser
    A financial adviser, is a professional who renders financial services to individuals, businesses and governments. This can involve investment advice, which may include pension planning, and/or advice on life insurance and other insurances such as income protection insurance, critical illness...

     with an initial commission (front-end load) and might be called retail shares.
  • Another class may be sold with no commission (load) direct to the public called direct shares.
  • Still a third class might have a high minimum investment limit and only be open to financial institutions, and called institutional shares.


In some cases, by aggregating regular investments by many individuals, a retirement plan (such as a 401(k) plan) may qualify to purchase "institutional" shares (and gain the benefit of their typically lower expense ratios) even though no members of the plan would qualify individually.

Diversity and risk

One of the main advantages of collective investment is the reduction in investment risk
Financial risk
Financial risk an umbrella term for multiple types of risk associated with financing, including financial transactions that include company loans in risk of default. Risk is a term often used to imply downside risk, meaning the uncertainty of a return and the potential for financial loss...

 (capital risk) by diversification
Diversification (finance)
In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of...

. An investment in a single equity may do well, but it may collapse for investment or other reasons (e.g., Marconi, Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...

). If your money is invested in such a failed holding you could lose your capital. By investing in a range of equities (or other securities) the capital risk is reduced.
  • The more diversified your capital, the lower the capital risk.

This investment principle is often referred to as spreading risk.

Collective investments by their nature tend to invest in a range of individual securities. However, if the securities are all in a similar type of asset class or market sector
Market sector
The term market sector is used in economics and finance to describe a set of businesses that are buying and selling such similar goods and services that they are in direct competition with each other...

 then there is a systematic risk that all the shares could be affected by adverse market changes. To avoid this systematic risk investment managers may diversify into different non-perfectly-correlated asset classes. For example, investors might hold their assets in equal parts in equities and fixed income
Fixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....

 securities.

Reduced dealing costs

If one investor were to buy a large number of direct investments, the amount they would be able to invest in each holding is likely to be small. Dealing costs are normally based on the number and size of each transaction, therefore the overall dealing costs would take a large chunk out of the capital (affecting future profits).

Costs

The fund manager
Investment management
Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...

managing the investment decisions on behalf of the investors will of course expect remuneration. This is often taken directly from the fund assets as a fixed percentage each year or sometimes a variable (performance based) fee. If the investor managed their own investments, this cost would be avoided.

Often the cost of advice given by a stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...

 or financial adviser
Financial adviser
A financial adviser, is a professional who renders financial services to individuals, businesses and governments. This can involve investment advice, which may include pension planning, and/or advice on life insurance and other insurances such as income protection insurance, critical illness...

 is built into the scheme. Often referred to as commission
Commission (remuneration)
The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold...

 or load (in the U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

) this charge may be applied at the start of the plan or as an ongoing percentage of the fund value each year. While this cost will diminish your returns it could be argued that it reflects a separate payment for an advice service rather than a detrimental feature of collective investment schemes. Indeed it is often possible to purchase units or shares directly from the providers without bearing this cost.

Lack of choice

Although the investor can choose the type of fund to invest in, they have no control over the choice of individual holdings that make up the fund.

Loss of owner's rights

If the investor holds shares directly, they may be entitled to shareholders' perks (for example, discounts on the company's products) and the right to attend the company's annual general meeting and vote on important matters. Investors in a collective investment scheme often have none of the rights connected with individual investments within the fund.

Investment aims and benchmarking

Each fund has a defined investment goal to describe the remit of the investment manager and to help investors decide if the fund is right for them. The investment aims will typically fall into the broad categories of Income (value) investment or Growth investment. Income or value based investment tends to select stocks with strong income streams, often more established businesses. Growth investment selects stocks that tend to reinvest their income to generate growth. Each strategy has its critics and proponents; some prefer a blend approach using aspects of each.

Funds are often distinguished by asset-based categories such as equity, bonds, property, etc.

Also, perhaps most commonly funds are divided by their geographic markets or themes.

Examples
  • The largest markets - U.S.
    United States
    The United States of America is a federal constitutional republic comprising fifty states and a federal district...

    , Japan
    Japan
    Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

    , Europe
    Europe
    Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

    , UK
    United Kingdom
    The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

     and Far East
    Far East
    The Far East is an English term mostly describing East Asia and Southeast Asia, with South Asia sometimes also included for economic and cultural reasons.The term came into use in European geopolitical discourse in the 19th century,...

     are often divided into smaller funds e.g. US large caps, Japanese smaller companies, European Growth, UK mid caps etc.
  • Themed funds - Technology, Healthcare, Socially responsible funds


In most instances whatever the investment aim the fund manager will select an appropriate index or combination of indices to measure its performance against; e.g. FTSE 100. This becomes the benchmark to measure success or failure against.

Active or passive management

The aim of most funds is to make money by investing in assets to obtain a real return (i.e. better than inflation).

The methods used to make your investment vary and two opposing views exist.

Active management
Active management
Active management refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index...

 - Active managers believe that by selectively buying within a Financial market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

 that it is possible to outperform the market as a whole. Therefore they employ dynamic portfolio strategies buying and selling investments with changing market conditions.

Passive management
Passive management
Passive management is a financial strategy in which an investor invests in accordance with a pre-determined strategy that doesn't entail any forecasting...

 - Passive managers believe that it is impossible to predict which individual holdings or section of the market will perform better than another therefore their portfolio strategy is determined at outset of the fund and not varied thereafter. Many passive funds are index fund
Index fund
An index fund or index tracker is a collective investment scheme that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions.-Tracking:Tracking can be achieved by trying to hold all of the...

s where the fund tries to mirror the market as a whole. Another example of passive management is the "buy and hold" method used by many traditional Unit Investment Trust
Unit Investment Trust
A Unit Investment Trust is a US investment company offering a fixed portfolio of securities having a definite life. UITs are assembled by a sponsor and sold through brokers to investors.-Types:...

s where the portfolio is fixed from outset.

An example of active management success
  • In 1998 Richard Branson
    Richard Branson
    Sir Richard Charles Nicholas Branson is an English business magnate, best known for his Virgin Group of more than 400 companies....

     (head of Virgin
    Virgin Group
    Virgin Group Limited is a British branded venture capital conglomerate organisation founded by business tycoon Richard Branson. The core business areas are travel, entertainment and lifestyle. Virgin Group's date of incorporation is listed as 1989 by Companies House, who class it as a holding...

    ) publicly bet Nicola Horlick
    Nicola Horlick
    Nicola Karina Christina Horlick, is a British investment fund manager.-Early life:...

     (head of SG Asset Management) that her SG UK Growth fund would not beat the FTSE 100 index, nor his Virgin
    Virgin Group
    Virgin Group Limited is a British branded venture capital conglomerate organisation founded by business tycoon Richard Branson. The core business areas are travel, entertainment and lifestyle. Virgin Group's date of incorporation is listed as 1989 by Companies House, who class it as a holding...

     Index Tracker fund over three years, nor achieve its stated aim to beat the index by 2% each year. He lost and paid £6,000 to charity.

Alpha, Beta, R-squared and standard deviation

When analysing investment performance, statistical measures are often used to compare 'funds'. These statistical measures are often reduced to a single figure representing an aspect of past performance:
  • Alpha
    Alpha (investment)
    Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances...

    represents the fund's return when the benchmark
    Benchmarking
    Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost...

    's return is 0. This shows the fund's performance relative to the benchmark and can demonstrate the value added by the fund manager. The higher the 'alpha' the better the manager. Alpha investment strategies tend to favour stock selection methods to achieve growth.

  • Beta
    Beta coefficient
    In finance, the Beta of a stock or portfolio is a number describing the relation of its returns with those of the financial market as a whole.An asset has a Beta of zero if its returns change independently of changes in the market's returns...

    represents an estimate of how much the fund will move if its benchmark moves by 1 unit. This shows the fund's sensitivity to changes in the market. Beta investment strategies tend to favour asset allocation models to achieve outperformance.

  • R-squared is a measure of the association between a fund and its benchmark. Values are between 0 and 1. Perfect correlation is indicated by 1, and 0 indicates no correlation. This measure is useful in determining if the fund manager is adding value in their investment choices or acting as a closet tracker mirroring the market and making little difference. For example, an index fund will have an R-squared with its benchmark index very close to 1, indicating close to perfect correlation (the index fund's fees and tracking error
    Tracking error
    In finance, tracking error is a measure of how closely a portfolio follows the index to which it is benchmarked. The most common measure is the root-mean-square of the difference between the portfolio and index returns....

     prevent the correlation from ever equalling 1).

  • Standard deviation
    Standard deviation
    Standard deviation is a widely used measure of variability or diversity used in statistics and probability theory. It shows how much variation or "dispersion" there is from the average...

    is a measure of volatility of the fund's performance over a period of time. The higher the figure the greater the variability of the fund's performance. High historical volatility may indicate high future volatility, and therefore increased investment risk in a fund.

Types of risk

Depending on the nature of the investment, the type of 'investment' risk will vary.

A common concern with any investment is that you may lose the money you invest - your capital. This risk is therefore often referred to as capital risk.

If the assets you invest in are held in another currency there is a risk that currency movements alone may affect the value. This is referred to as currency risk.

Many forms of investment may not be readily salable on the open market (e.g. commercial property) or the market has a small capacity and investments may take time to sell. Assets that are easily sold are termed liquid therefore this type of risk is termed liquidity risk
Liquidity risk
In finance, liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss .-Types of Liquidity Risk:...

.

Fee types

There may be an initial charge levied on the purchase of units or shares this covers dealing costs, and commissions paid to intermediaries or salespeople. Typically this fee is a percentage of the investment.
Some schemes waive the initial charge and apply an exit charge instead. This may be gradually disappearing after a number of years.

The scheme will charge an annual management charge or AMC to cover the cost of administering the scheme and remunerating the investment manager. This may be a flat rate based on the value of the assets or a performance related fee based on a predefined target being achieved.

Different unit/share classes may have different combinations of fees/charges.

Pricing models

Open-ended schemes are either dual priced or single priced.

Dual priced schemes have a buying (offer) price and selling or (bid) price. The buying price is higher than the selling price, this difference is known as the spread or bid-offer spread
Bid-offer spread
The bid–offer spread for securities is the difference between the prices quoted for an immediate sale and an immediate purchase...

. The difference is typically 5% and may be varied by the scheme manager to reflect changes in the market; the amount of variation may be limited by the schemes rules or regulatory rules. The difference between the buying and selling price includes initial charge for entering the fund.

The internal workings of a fund are more complicated than this description suggests. The manager sets a price for creation of units/shares and for cancellation. There is a differential between the cancellation and bid prices, and the creation and offer prices. The additional units are created are place in the managers box for future purchasers. When heavy selling occurs units are liquidated from the managers box to protect the existing investors from the increased dealing costs. Adjusting the bid/offer prices closer to the cancellation/creation prices allows the manager to protect the interest of the existing investors in changing market conditions.

Most unit trusts are dual priced.

Single priced schemes notionally have a single price for units/shares and this price is the same if buying or selling. As single prices scheme can't adjust the difference between the buying and selling price to allow for market conditions another mechanism the dilution levy exists. SICAVs, OEICs and U.S. mutual funds are single priced.

A dilution levy can be charged at the discretion of the fund manager, to offset the cost of market transactions resulting from large un-matched buy or sell orders. For example if the volume of purchases outweigh the volume of sales in a particular trading period the fund manager will have to go to the market to buy more of the assets underlying the fund, incurring a brokerage fee in the process and having an adverse affect on the fund as a whole ("diluting" the fund). The same is the case with large sell orders. A dilution levy is therefore applied where appropriate and paid for by the investor in order that large single transactions do not reduce the value of the fund as a whole.

Internationally recognised collective investments

  • Exchange-traded fund
    Exchange-traded fund
    An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE...

    s or ETFs - a closed-end fund traded by listed shares on major stock exchanges.
  • Real Estate Investment Trusts
    Real estate investment trust
    A real estate investment trust or REIT is a tax designation for a corporate entity investing in real estate. The purpose of this designation is to reduce or eliminate corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors...

     or REITs - a close-ended fund that invests in real estate.
  • Sovereign investment fund
    Sovereign investment fund
    A sovereign investment fund is an investment fund created or controlled by a government, usually of a country with trade surpluses and abundant foreign monetary reserves....

    s

US-specific collective investments

(Click here for US SEC description of investment company types).
  • Mutual Funds
    Mutual fund
    A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...

     - Open-ended with a corporate or trust structure.
  • Closed-end fund
    Closed-end fund
    A closed-end fund is a collective investment scheme with a limited number of shares. It is called a closed-end fund because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.Typically an...

    s - Closed-ended with corporate structure.
  • Unit Investment Trusts
    Unit Investment Trust
    A Unit Investment Trust is a US investment company offering a fixed portfolio of securities having a definite life. UITs are assembled by a sponsor and sold through brokers to investors.-Types:...

     - Open-ended with a trust structure and limited duration.
  • Exchange-traded fund
    Exchange-traded fund
    An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE...

    s (ETFs) - Structured as mutual funds or unit investment trusts, but publicly traded.

UK-specific collective investments

  • Exchange-traded fund
    Exchange-traded fund
    An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE...

    s (ETFs) - Open-ended with a corporate structure.
  • Investment Trust
    Investment trust
    An Investment trust is a form of collective investment found mostly in the United Kingdom. Investment trusts are closed-end funds and are constituted as public limited companies....

    s - Introduced 1868. Closed-ended with corporate structure.
  • OEICs or ICVC
    ICVC
    An Open-ended investment company or Investment Company with Variable Capital is a type of open-ended collective investment formed as a corporation under the Open-Ended Investment Company Regulations 2001 in the United Kingdom...

    s - Introduced 1997. Open-ended with a corporate structure.
  • Unit Trusts
    Unit trust
    A unit trust is a form of collective investment constituted under a trust deed.Found in Australia, Ireland, the Isle of Man, Jersey, New Zealand, South Africa, Singapore, Malaysia and the UK, unit trusts offer access to a wide range of securities....

     - Introduced 1931. Open-ended with a trust structure.
  • Unitised Insurance Funds
    Unitised insurance fund
    Unitised insurance funds or unit-linked insurance funds are a form of collective investment offered through life assurance policies.An insurance company's contract may offer a choice of unit-linked funds to invest in. Insurers that offer these contracts are mainly found in the UK and British Isles...

     - Introduced 1970s. Open-ended with a life policy structure.
  • With-profits policy
    With-profits policy
    A with-profits policy or participating policy is an insurance contract that participates in the profits of a life insurance company. The company is often a mutual life insurance company, or had been one when it began its with-profits product line...

     - Open-ended with a life policy structure.

Canadian collective investments

  • Income Trust
    Income trust
    An income trust is an investment that may hold equities, debt instruments, royalty interests or real properties. The trust can receive interest, royalty or lease payments from an operating entity carrying on a business, as well as dividends and a return of capital.The main attraction of income...

    s
  • Labour Sponsored Fund
    Labour Sponsored Venture Capital Corporation
    A labour-sponsored venture capital corporation ', known alternately as labour-sponsored investment fund ' or simply retail venture capital, is a fund managed by investment professionals and invested in small to mid-sized Canadian companies...

    s
  • Mutual fund
    Mutual fund
    A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...

    s

France & Luxembourg

  • Investment funds
    • FCP (Fonds commun de placement
      Fonds commun de placement
      Fonds commun de placement translates to "investment funds" or "mutual funds", and are open-ended collective investment funds based that are neither trust or company law based...

      ) (unincorporated investment fund or common fund)
    • SICAF (Société d'investissement à capital fixe) (Investment company with fixed capital)
    • SICAV
      SICAV
      A SICAV is an open-ended collective investment scheme common in Western Europe, especially Luxembourg, Switzerland, Italy, Spain, Belgium and France...

       (Société d'investissement à capital variable) (Investment company with variable capital)

Netherlands and Belgium

    • BEVAK (Investment company with fixed capital)
    • BEVEK (Investment Company with variable capital)
    • PRIVAK (Closed-end investment company)

Ukraine

    • Instytut spilnogo investuvannya, ISI (Investment Funds)
      • Private investment fund (Payovyi investytsiyny fond)
      • Public investment fund (Korporatyvny investytsiyny fund)

Both funds are run by Investment Company (KUA - kompania z upravlinnya actyvami).Funds and companies regulated and supervised by DKTsPFR (Securities and stock market state commission)

Greece

We could say that a mutual fund is a pool of money which belongs to many investors. Otherwise a M/F is the common cashier of many investors who trust a third party to operate and manage their wealth. Moreover they order this third party which in Greece is called A.E.D.A.K. (Mutual Fund Management Company S.A.) to spread their money in many different investment products such as shares, bonds, deposits, repo etc. Those companies in Greece may provide services according to article 4 of Law 3283/2004. People who own units (shares) of a mutual fund are called unitholders. In Greece co-unitholders, which are persons participating in the same units of M/F have exactly the same rights as the unitholder (according to the Law for the deposits in common account 5638/1932). The unitholders have to sign and accept the document which describes the purpose of the Mutual Fund, how it operates, and anything concerning the Fund. This document is the regulation of the M/F. The property of each M/F by law have to be under the control of a bank legally operating in Greece (Greek or foreign). The bank is the custodian of the M/F and except of the custody of the fund also controls the lawfulness of all movements of the management company. The Supervisory and Regulatory Body of M.F. Management Companies and Portfolio Investment Companies is the Greek Capital Market Commission. It comes under the jurisdiction of the Ministry of National Economy and controls the operation of all M/Fs available in Greece. All investors have to be very careful and about the risk they undertake. They have to have in mind that all investments have a certain degree of risk. Risk – free investments does not exist. You can find more about Greek Mutual Funds in the site of the Association of Greek Institutional Investors or the site of Greek (Hellenic) Capital Market Commission.

Switzerland

  • open-ended
    • Anlagefonds (unincorporated investment fund or common fund)
    • SICAV
      SICAV
      A SICAV is an open-ended collective investment scheme common in Western Europe, especially Luxembourg, Switzerland, Italy, Spain, Belgium and France...

       (Société d'investissement à capital variable) (Investment company with variable capital)
  • closed-ended
    • Kommanditgesellschaft für Kapitalanlagen (Limited Partnership
      Limited partnership
      A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...

      )
    • SICAF (Société d'investissement à capital fixe) (Investment company with fixed capital)

Australian collective investments

  • Listed investment company or LIC. Closed-ended collective investment either corporate or trust based. Available since 1928.
  • Managed Investment Scheme per s 9 of the Corporations Act (Cth) 2001
  • Unit trust
    Unit trust
    A unit trust is a form of collective investment constituted under a trust deed.Found in Australia, Ireland, the Isle of Man, Jersey, New Zealand, South Africa, Singapore, Malaysia and the UK, unit trusts offer access to a wide range of securities....

    s open-ended trust based investments often called Managed funds, managed investment schemes or unlisted managed funds. If the managed investment scheme is open for retail investors, the managed investment scheme must be registered with ASIC. An unregistered scheme has an Trustee
    Trustee
    Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...

     whilst a registered scheme has an Responsible Entity
    Responsible entity
    A responsible entity is a peculiarly Australian invention designed to replace the manager/trustee in managed investment schemes. It was created by the , which made significant amendments to the prescribed interest provisions contained in the Australian Corporations Act.The new arrangements replaced...

    .

Offshore collective investments

  • Segregated portfolio company
    Segregated portfolio company
    A segregated portfolio company , sometimes referred to as a protected cell company, is a company which segregates the assets and liabilities of different classes of shares from each other and from the general assets of the SPC.Segregated portfolio assets comprise assets representing share capital,...

     a corporate entity for holding various investments under a single legal entity.

See also

  • Closed-end fund
    Closed-end fund
    A closed-end fund is a collective investment scheme with a limited number of shares. It is called a closed-end fund because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.Typically an...

  • Exchange-traded fund
    Exchange-traded fund
    An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE...

  • Financial intermediary
    Financial intermediary
    Financial intermediation consists of “channeling funds between surplus and deficit agents”. A financial intermediary is a financial institution that connects surplus and deficit agents...

  • Financial planner
    Financial planner
    A financial planner or personal financial planner is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes: cash flow management, education planning, retirement planning, investment planning, risk management and insurance...

  • Fund derivative
  • Fund of hedge funds
  • Global assets under management
    Global assets under management
    Global asset allocation or Global assets under management consists of pension funds, insurance companies and mutual funds. Other funds under management include private wealth and alternative assets such as hedge funds and private equity...

  • Hedge fund
    Hedge fund
    A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...

  • Independent financial adviser
    Independent Financial Adviser
    Independent Financial Advisers or IFAs are professionals who offer independent advice on financial matters to their clients and recommend suitable financial products from the whole of the market...

  • Investment adviser
  • Investment management
    Investment management
    Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...

  • Offshore investment
    Offshore investment
    Offshore investment is the keeping of money in a jurisdiction other than one's country of residence. Offshore jurisdictions are a commonly accepted solution to reducing tax burdens levied in most countries to both large and small scale investors alike...

  • Open-end fund
    Open-end fund
    An open-end fund is a collective investment scheme which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders...

  • Private equity fund
    Private equity fund
    A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....

  • Specialized investment fund
    Specialized investment fund
    A specialized investment fund or SIF is a type of investment fund governed by the Luxembourgish law of the 13th February 2007 replacing the law of 1991 defining the legal framework for institutional funds and enlarging the destribution scope to "informed investors"...

  • Common fund
    Common fund
    A common fund is a form of collective investment scheme based upon contractual law rather than being enacted through a trust, corporation or insurance policy....


External links

  • Answers U.S. SEC Consumer Information
  • Investments UK FSA
    Financial Services Authority
    The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...

    Consumer Information
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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