What is an investment fund?
A collection of funds from separate individuals, used to invest in assets and securities collectively. Each investor retains ownerships of their portion of the investment. The collective amount in the fund can be very large, which enables the fund manager to access better investment opportunities and negotiate better returns.
Advantages of an Investment Fund
As well as the investment fund having the opportunity to hire an investment manager to negotiate better deals, there are other benefits including:
• Benefit from economies of scale, i.e., lower transaction costs;
• Increase the asset diversification to reduce some systemic risk
Variations of Investment Fund
Depending on the country there are a few variations of Investment Fund as a term, these include:
• Investment Pools
• Collective Investment Vehicles
• Collective Investment Schemes
• Managed Funds
Passive or active funds
In most territories funds are typically divided into two categories, active and passive.
It is safe to say that one in four funds are passive, there is no stock picking involved, the fund buys the shares or market represented and therefore tracks it, i.e. a fund that mirrors the FTSE 100 and will deliver the same returns as that market.
An active fund on the other hand has a manager buying and selling assets, attempting to beat the market.
Choosing a fund
There are many funds to choose from in the open market; they are divided into different types or sectors. You can buy funds that invest in shares, corporate bonds, gilts, commodities and property, they will also typically have some form of geographical focus.
The wealth of choice means investors can target any theme they choose but can also make picking one baffling.
AXA Mansard Funds
Check out the AXA Mansard Funds available as options: