Investment Fund

Investment fund refers to a firm pooling funds from various retail investors and this is then invested for a fee. In this manner, an investment company provides the individual investors access to an array of securities.

Thereby, investment fund permits its investors to increase the exposure and avail a range of options. This fund brings down the trading costs and is appropriate for investors wishing to invest in securities. An investment fund ranged from low-yielding bond funds to high hedge funds.

Types of funds

Investment funds are in two types, open-ended and close-ended. The open-ended fund allows investors to sell shares as per their desire and the close-ended funds are kept locked for a specific period.

Fund investors prefer public funds owing to its flexibility and liquidity, but people looking for longer term horizons opt for private fund.

Investment funds are of two types- private funds and public funds.

• Private funds: involves up to 50 investors where in each person contributes a particular amount to the extent that it is not below $1 million/investor. The money thus accumulated is invested into a class of assets. These funds are usually close-ended funds and are right for people desiring to invest for a long-term investment. Money managers in such types of investment funds employ specialized knowledge of selected asset class in the aim of obtaining higher returns from public funds than expected.

• Private funds are constrained by regulation and this is applicable in offshore jurisdictions. The offshore jurisdictions offer legal infrastructure to operate private and closed end funds through limited liability companies or partnerships. The offshore company is lowly-taxed and its individual members receive profits. The private closed-end funds are more relaxed in comparison to public funds and the investors concerned are rich owing to wiser bargain.

• Public funds: offer transparency, liquidity and high flexibility. Such funds are required to declare net asset value and such funds are open-ended structure. Public funds need frequent valuation and the public mutual funds are based on offshore jurisdictions. The funds are offshore based and are true surrogate for end-investments in majority investment classes as these offshore jurisdictions can use double tax treaties and decrease the tax rates effectively, such that a private investor can do this only with great hassle.

Investment Funds contribution

Investment funds contribution in the markets has increased dramatically in the recent years and only few investment funds having good cash flow in millions are invested in listed securities. However, the capital targeted rises over a period of time.