Investment trust

The investment trust are organizations of collective detention of financial credit.

They function in multipropriété, while emitting near the savers, in the form of actions, of the documents of title which represent a share of their Portefeuille. They are generally with variable capital, which allows subscriptions and repurchases constantly by the savers.

The purchasers of these shares are informed in advance of the methods of management of the funds: type of financial credits, policy of management, objectives sought, fresh, assembling share, rate/rhythm of calculation of its value… That enables him to choose the funds best adapted to its situation and its objectives of placement (see Style of investor).

In English, one speaks about " mutual funds" or " investment trusts".

Orthography

In the singular as in the plural, the funds term takes a “S” final.

Legal structure (France)

Various forms

In France, the legal forms of these funds are varied:

OPCVM (Undertaking for collective investment in Transferable securities)

SICAV (Investment company with Variable capital)
CPF (Investment funds)

FCPE (Investment funds of Company)
FCPR (Investment funds at the Risks)
FCPI (Investment funds in the Innovation)

FIP (Funds of Investment of Proximity)
Funds of funds or OPCVM of OPCVM
SCPI (Civil society of Investment in real estate)
OPCI (Undertaking for collective investment in Real estate)
SOFICA (Company for the financing of cinema industry and audio-visual)
Investment trust of Swiss right authorized to the sale in France
Luxembourg Funds
shaped Funds

Lawful environment

The funds are managed by a structure especially regulated and approved for this purpose: a Management company. The regulation imposes, inter alia, the distinct book-keeping for each managed fund, of the clearly announced objectives (primarily as regards taking risk), and the respect of strict obligations, as the permanent research of the advantage of the carriers (concept of management for the account of third) and the respect of equity between the latter.

In France or of Quebec, the Authority of the financial markets takes care of the observance of the regulation relative to these Funds. The cards of information (Notes or simplified Card) are thus standardized, for more effective information of the carriers of shares of Funds.

The cost for the carriers

The expenses, which remunerate on the one hand the management company, on the other hand the organizations which ensure the distribution (networks of bank, of insurance, financial advisers…) break up mainly into

costs of purchase (import duty),
(annual fixed price, in proportion to the managed capital)
costs of exit (removal cost).

For certain quoted on the stock exchange funds, the exit and deposit charges take in fact the form of Courtage.

The funds of investment also support expenses of transaction at the time of the purchase and the sale of titles as of the tax expenses which are taken by the tax department on the most been worth realized.

Classes of credits

The funds can be invested, according to their nature and of their initial mandate, in different classes from credits:

Monetary: credits of short expiry, with the output close to Bond inflation
: comparable obligations and titles
Actions: comparable actions and titles
Real: buildings
Non quoted: invested in titles of companies not - dimensioned
Credits: placed in operations of credit (Securitization) granted directly or by repurchase of banking credits (pools of credits)
Metals: however, money,…
Raw materials (“commodities”): oil,…
Exotic: any kind of credits (invaluable stones, films,…)
Ethical (also called interdependent or socially persons in charge), composed of actions of companies respecting certain criteria considered " équitables")

There also exists of other more complex funds composed of several classes of credits

Mixtes: Composed of several classes of credits
Funds of Funds: Composed themselves of several other funds.
has formula, or guaranteed: obligations + option, presenting a formula (known in advance) of output (unknown in advance), from which the capital can be protected, partially, or entirely
Alternatif: hedge funds - to see alternative Management)
Structured, in particular to guarantee the funded capital: to see structured Management

Style of management

There exist two main categories of funds of investment.

The funds of active management (great majority of the cash in hand in Europe) try to do better than the market, i.e. to beat index (CAC 40, S&P 500,…), by buying and selling titles likely to generate more been worth. Their level of risk is function of the strategy of the managers of the bottom. More management is active plus the expenses are high, taking into account the expenses of transaction (purchase and sale) and of the tax expenses.

The funds of passive management seek to retort a market (for example the market of great French capitalizations) and its index (the CAC 40) by buying the actions of the companies composing the index (generally according to the market cap) and while varying its wallet with the modifications of the index. Their level of risk corresponds to the level of risk of the market which they seek to retort. Lastly, their transaction and overheads are much lower than the expenses of the funds of active management.

Among the funds of active management, there exist several styles of management of funds, more or less " dynamiques" in the short run (fast arbitrations) or stable in the long run (" buy and hold"), more or less diversified S or selective. One finds in particular the orientations of management following:

“Growth stocks” (growth): Who is invested in securities in sectors with strong growth
“Values of credits” (been worth): Who is invested in powerful and stable securities with important values of credits in traditional sectors
“Large capitalization” (big course): Who is invested in titles of large companies.
“Small capitalization” (small course): Who is invested in titles of small firms.

The alternative funds (called Hedge funds in English) are a category well with share of investment trust. They are regulated very little compared to traditional investment trust. They continue types of transactions which traditional investment trust is not authorized to carry out: transaction with action leverage of the loan, short sale, options and future…

The principal types of alternative funds are:

arbitration of obligation
arbitration of fusion
function of event
macro total economy
gone neutral action
gone emerging
raw materials
securities in distress
relative value
short sale

Their level of risk is very variable. A bottom " market action neutre" who buys and sell actions so as to preserve a neutral exposure of risk compared to the market action can have a level of half risk less than a bottom of placement indiciel action Zone Europe, for example. An alternative bottom on a volatile class of credit as the raw materials can be very risky according to the strategy of the manager and his propensity to use the action leverage of the loan (the recent bankruptcy of the funds alternate Amaranth proved it).

In preoccupations with a protection of the particular investors, the access to the alternative funds is limited to a public of investors informed or having important financial placements.

Their expenses are in general of about a 1.5% plus a variable function of the performance (often 20% of the appreciations beyond an index of reference).

Lastly, the liquidity of the funds alternate is more reduced than that of investment trust traditional: it is often necessary to await a month or two to be able to sell them.

Quoted on the stock exchange investment trust

The quoted on the stock exchange funds, often indicated by the English acronym ETFs which means Exchange Traded Funds, are interesting alternatives to the funds of investment functioning by subscription and resale near an financial institution distributer (banks…). These quoted on the stock exchange funds or ETFs dimension like actions of company and are also bought like quoted shares. Their overheads are in general less low than investment trust and their expenses of transaction are connected with those of the actions near the companies of broking. They allow in a way very economic to diversify the stock exchange of private individuals and institutional investments.

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