An investment fund is a collective investment undertaking which invests the funds entrusted to it in order to generate an income that it distributes among its participants. Depending on the legal form, a fund sells participation units or issues investment certificates. The fund’s deposits may include financial instruments and other property rights.
The investment fund is created by the Investment Fund Company, which is its body, manages and represents it in relations with third parties.
The basic investment fund document defining the rules of its operation, including the investment policy, is its statutes and, depending on the type of fund, an information prospectus or a prospectus (possibly an information memorandum). The key information on the investment fund shall include a summary information document, drawn up in accordance with the UCITS Directives.
An investment fund with a frequency determined in the fund’s articles of association, measures the assets under management based on their reliably estimated fair value and determines liabilities.
The register of the assets of an investment fund shall be kept by the Depositary, which is a bank fulfilling statutory requirements for the performance of this function. The Depositary shall also be responsible for ensuring that the valuation of the assets of the fund and its operations are properly carried out in accordance with the fund’s statute and law.
Why is it worth investing in an investment fund?
Investing in investment funds has many advantages, which are particularly valuable for people who do not have the necessary knowledge, experience or tools to facilitate rational investment decisions on the capital market.
Entrusting difficult and laborious activities related to conducting analyses of stock exchange trends or the economic situation of issuers to capital market specialists may bring benefits in the form of lower investment risk.
Collective investment is also an advantage of lower transaction costs per contributor compared to individual investment. Depending on the personal situation, financial objectives and level of risk tolerance, each individual may choose a suitable investment fund.
Savings must be channelled into investment funds in the medium to long term. However, an investor who prefers highly liquid investments should purchase participation units of open ended investment funds or closed end investment funds’ certificates, listed on the stock exchange.
Closed end investment fund: