Investment funds

What is an investment fund?

A fund that is operated by a trust company or a bank and handles a pooled group of trust accounts. Collective investment funds combine the assets of various individuals and organizations to create a larger, well-diversified portfolio. The following are two types of collective investment funds:

A1 Fund: A fund of grouped assets contributed by either the holding bank or affiliated banks for the exclusive purpose of investment and reinvestment.

A2 Fund: A fund of grouped assets contributed by pension, profit sharing, retirement, or other trusts that are exempt from federal income tax

The idea of a collective fund is to lower costs through economies of scale by combining pensions and profit-sharing funds. These pooled funds are grouped into what is known as a
master trust account under the control of the bank, which acts as trustee, guardian, executor or administrator.

Terminology varies with country but investment funds are often referred to as investment pools, collective investment vehicles, collective investment schemes, managed funds, or simply funds. An investment fund may be held by the public, such as a mutual fund, exchange-traded fund, or closed-end fund,[1] or it may be sold only in a private placement, such as a hedge fund or private equity fund.[2] The term also includes specialized vehicles such as collective and common trust funds, which are unique bank-managed funds structured primarily to commingle assets from qualifying pension plans or trusts.

The funds may be invested in different asset classes, according to their nature and the type of mandate:

  • Monetary Funds: short-term assets with a performance close to inflation rate.
  • Bond Funds: debt and assimilated securities.
  • Shares: usual shares and related securities
  • Real estate
  • Not listed markets: securities from unlisted companies
  • Receivables: credit transactions – securitization
  • Metals: Gold, Silver…
  • Raw materials and commodities…

… And many other ones too.