INVESTMENT FUND
1- What is Investment fund?
An investment fund is a non-bank financial intermediary that attracts idle money from a variety of sources to invest in stocks, bonds, currency, or other assets. All these investments are professionally managed, closely by the fund management company, custodian bank and other authority.
Investors often have confusion between investment funds and investment fund management companies. In terms of functions, the fund management company is the unit that manages investment funds, and investment funds can be considered as products and services that the fund management company provides to investors.
2- Why choose Investment fund?
Financial investment is not a simple job but requires a lot of expertise, market knowledge, and especially time factors. In addition, there are some types of investment such as investment in bonds, investment in the indexes, investors cannot do it themselves. Therefore, individual investors or legal entities often decide to invest through the fund because of 06 factors:
- Minimize risk thanks to diversifying portfolio
- Cost savings but still meet profitability requirements
- Professionally managed
- Closely supervised by the authorities
- The dynamics of investment funds
- Participating in investment in specific products such as bonds, portfolio swap fund
3- INVESTMENT FUND CERTIFICATES
Each investor investing in the fund owns a portion of the fund's total portfolio. This holding is reflected through the ownership of investment fund certificates (fund certificates).
To establish a fund, the fund management company must issue a fund management fund. Funds are also a type of stock and have stock characteristics. Let's take a look at the similarities and differences between CCQ and Stocks in the table below:
Like:
Claim ownership
Enjoy profits on capital contributions
To be listed on the stock exchange (depending on the characteristics of the fund)
Other:
Investors do not have the right to vote or own a fund management company
All decisions will be made by the fund management company
The attractiveness of ICs lies in the safety and saves much more time than buying and selling stocks because investors have a company apparatus of leading investment experts to make investments for them. they by methodical principles. Investors only need to focus on doing their professional work and enjoy the results from holding fund certificate.
In addition, in terms of investment significance, capital turnaround time and investment efficiency are a factor that makes IP certificates more attractive compared to Gold, Real Estate or even savings channels. The current types of funds managed by IIM only need a minimum capital amount of € 1 million for investors to join immediately.
4- CLASSIFICATION OF INVESTMENT FUND
Currently, there are many types of investment funds in the world based on different classification criteria.
1. Based on mobilized capital
Collective investment fund (Public fund)
Fund that mobilizes capital by offering to the public. Investors can be individuals or legal entities but most of them are individual investors. The public fund provides small investors with an investment vehicle that ensures investment diversification, minimizes risks and low investment costs with high efficiency brought about by the professionalism of the investment.
Personal investment fund (Member fund)
This fund raises capital by means of a private placement to a small group of investors, which can be selected in advance, individuals or financial institutions or large economic groups, thus its liquidity. the amount of this fund will be less than the public fund. Investors in private funds often have large amounts of capital, and in return they can participate in the investment control of the fund.
2. Based on the capital mobilization structure
Closed fund
What is closed-end fund?
This is the form in which the fund issues one-time fund certificates only when raising capital for the fund and the fund does not redeem shares / investment certificates when investors have the need to resell. In order to create liquidity for this type of fund, after finishing the capital mobilization (or closing the fund), fund certificates will be listed on the stock market.
Investors can buy or sell to recover their invested capital through the secondary market. Fund certificates can be traded at or below the net asset value of the Fund (NAV).
What is an open fund?
An open-ended fund is a fund that has been established for an indefinite time. After the initial public offering, buying / selling transactions of investors are conducted periodically on the basis of net asset value (NAV). This transaction is done directly with the Fund Management Company or at designated agents.
Unlike closed-end funds, the total capital of an open-ended fund fluctuates with each transaction due to its specificity - that the investor is entitled to resell the fund certificates to the fund, and the fund must redeem certificates according to net worth at the time of the transaction. For this form of fund, the transactions of buying and selling fund certificates are done directly with the fund management company and fund certificates are not listed on the stock market.
Open Fund Features
3. Based on the organizational structure and operation of the fund
Company-type investment fund
In this model, an investment fund is a legal entity, that is, a company formed according to the provisions of the laws of each country. The highest executive body of the fund is a board of directors elected by shareholders (investors), whose main task is to manage the entire operation of the fund, to select a fund management company and to supervise operations. Fund management company's investment and the right to change the fund management company. In this model, the fund management company acts as an investment consultant, responsible for conducting investment analysis, managing portfolios and performing other business administration tasks. This model has not appeared in Vietnam because according to the SSC's regulations, the investment fund has no legal status.
Investment funds in the form of contracts
This is an investment trust fund model. Unlike the corporate investment fund model, this investment fund model is not a legal entity. The fund management company sets up the fund, carries out the capital mobilization, and makes the investment according to the objectives set out in the fund's charter. In addition, the custodian bank plays a role in preserving the fund's capital and assets, and the relationship between the fund management company and the custodian bank is reflected in a supervisory contract which specifies the rights and obligations of the fund. of the two parties in the implementation and supervision of the investment to protect the interests of investors. Investors are those who contribute capital to the fund (but are not shareholders like a company investment fund model) and entrust the investment to the fund management company to ensure the highest profitability from the fund. their contributed capital.