Day: June 27, 2018

Different Types of Fund Management

With the number of financial products offered is rising in the markets just as adding more colors into an already crowded canvas, the opportunity for an investor to stay invested for a long period of time is considerably reducing as they want to experiment new investment products which are introduced in the markets every now and then. How does a fund manager understand and invest on the client’s behalf is an important aspect for the investments to perform well and have a good mix of both long term and short term funds, including equity and debt funds for sustenance.

Types of investment:

Products which investors will pin their earnings are broadly categorized under registered investment companies and private funds. Those companies which are registered under the Companies Act, have to comply with regulations and disclosure requirements as stipulated in the Act as they are offered to the public to invest their money. They have to adhere to compliance and due diligence reporting requirements stipulated.

  • Mutual funds- buying of shares of a company on a continuous basis as and when the unit price is low are the ideal form of investment for the working class. They are directly purchased from the fund house or the broker depending upon how the open-ended scheme’s performance. There are quite a number of variations in the funds allocated to mutual funds which could be like a money market fund, index funds, ETF, bond funds to name a few.
  • Close-ended funds– they offer a limited amount to be purchased from their offerings to the public in the initial offer, the shares are traded in the secondary market, and the investor has to depend on the broker to sell the shares and get the maximum profit.
  • Unit investment trust- these are offered to the public on a one time basis, and can be held till the date of termination of the UIT, as the trust will pay out the proceeds based on the market value as o the date of termination, they are more or less a static investment which is like one time investment and then waits once the UIT is dissolved to give a fixed good return.

Privately managed funds are offered only to a select group of investors who inject a lot of money on the fund and have a very few HNI in the list, they usually avoid getting registered with the Act due to high regulatory and compliance requirements. Most of the privately managed funds like hedge funds, private equity funds are organized and do not have any performance related issues.