For beginner investors it is important to study the maximum information about the implementation of investment activities. Many of them may have a question about what investment funds are and what they are intended for. For this reason, you should familiarize yourself with the topic presented in more detail.
Definition of a concept
An investment fund is a property complex that is jointly owned by individuals or legal entities or a joint stock company. The management company regulates the activities of investment funds in the interests of investors.
The main objective of the institution is to provide access to the securities market and attract financial resources of ordinary investors in the economy. It is worth noting that the management of existing assets is carried out by licensed professional market participants. In the Russian Federation, investment funds are formed and managed on the basis of established legislative norms.
Classification by the form of creation
When considering the topic of investment funds, you should first of all find out that they are divided into joint-stock and unit trusts, depending on the form of creation. These two species should be studied in more detail.
Joint-stock investment fund is an open joint-stock company, which is distinguished by the presence of a single subject of its activity. This is an investment property. Funds of this type specialize in placement ordinary shares. This means: in order to become a participant, it is required to purchase securities, that is, to invest financial resources to make profit in the future. In order to terminate its participation in a joint-stock investment fund, it is necessary to sell the acquired financial instruments on the open market.
A unit investment fund (UIF) cannot be called a legal entity. Legislation defines it as a separate property complex, which consists of values committed to entities in trust management. In order to become a member of this fund, you must purchase a share from the managing company. It is executed as a security, which confirms that the investor belongs to a certain share in the net assets of the institution. According to the established rules, the company has the ability to sell and buy such shares. It is worth noting that a mutual investment fund can be open, closed or interval. Managing it is permissible only for professional market participants. It may be a management company that has received the appropriate license.
Types of investment funds by investment objects
When classifying investment funds by investment objects, the following should be highlighted:
- bond funds;
- equity funds;
- mixed.
Note that the concept of sectoral funds is legally established. They specialize in investments in manufacturing and industrial activities.
Mutual investment funds, which have a stock index corresponding to the investment portfolio, are called index funds. This index is formed by the securities of companies holding leading positions in the market. Thus, the risk of such investments is quite small.
Real estate investment funds are created in a closed form. This is due to the fact that the implementation of construction projects takes much longer than the sale of financial instruments.
Modern legislation also provides a separate group, which includes funds for qualified investors. They have legal freedom in the process of selecting objects for investment. In developed countries, venture funds are popular that support promising projects at the stage of their implementation and companies at the initial stage of development.
Functioning
Basically, for the operation of an investment fund, the following parties are required:
- Investors. Their function is to create a fund and provide seed capital. The latter acts as an investment, so investors have the right to invest or withdraw funds.
- Fund Board. Performs careful control over the implementation of investment activities. The board must include suitable people.
- Investment manager. It provides investment activities in accordance with the strategy agreed with investors.
- Banks. Exercise control over administration and assets. Partnerships with a suitable financial institution.
- Central agent. It calculates the value of shares of the institution and maintains a register of investors.
The participants in the investment fund under consideration may vary depending on the particular company and the rules established therein.
Fundamentals of the work of investment funds
Open investment funds adhere to the following principles when carrying out their activities:
- Centralized management. The institution must carry out holistic state management, despite the steadily large or increasing number of beneficiaries.
- Exercise control. An investment fund should be able to make various decisions, as well as establish certain rules and adhere to them. This process should be monitored.
- Respect for confidentiality. In the process of acquiring assets and placing financial assets, there is no need for disclosure of beneficiaries.
- Reliability. It is necessary to adhere to individual rules for the sale and acquisition of shares, as well as conduct professional licensed management of the institution.
- Receiving a profit. The foundation is to enable investment in assets that will be available to professional and institutional investors.
Charter
Investment funds must have a charter, which contains:
- a provision indicating that the subject of activity is the investment of financial assets in property, securities, etc .;
- investment declaration, which defines the main goals, directions and restrictions of activity, as well as the limiting shares of property that are allowed for investments;
- procedure and method for paying dividends;
- a ban on the issuance of certain securities;
- a ban on specific activities.
Considering the units of investment funds, it is worth noting that the value of assets should not be less than the sum of the minimum wage in the amount of 10,000 times.
Check Investment Funds
Special attention will be paid to CHIFs. This abbreviation stands for "check investment fund." A similar organization was first created in 1992 in the Russian Federation in the period voucher privatization. The legislation establishes that the mutual funds are intended to assist citizens in the privatization of investment checks. In addition, professional management of this type of fund is provided.
Vouchers (privatization checks) were supposed to replace investors as conceived by adherents of privatization. Their owners had the opportunity to exercise control over the management of the company, adhering to the interests of investors. A check investment fund is a closed-type joint-stock fund.
findings
Various types of investment funds are indispensable participants in investment activities. If you want to make investments in securities or property, it is worthwhile to familiarize yourself with the information about them. For a novice investor and those who study economics, this will be especially useful.
