Collective Investment Scheme
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A Collective Investment Scheme is an investment scheme that can be used to create pooled investment vehicles (that support diversified investment strategy tasks).
- AKA: Investment Fund, Managed Fund, Pooled Investment.
- Context:
- It can typically pool investor money from multiple investors to benefit from group investment advantages.
- It can typically hire professional investment managers to provide investment expertise, portfolio management, and investment risk management.
- It can typically leverage economies of scale to reduce transaction costs and administrative expenses.
- It can typically increase asset diversification to reduce systematic risk and portfolio volatility.
- It can typically provide investment access to market segments or asset classes that may be difficult for individual investors to access.
- It can typically offer ongoing management of investment portfolio based on stated investment objectives.
- It can typically maintain regulatory compliance with investment regulations in operating jurisdictions.
- ...
- It can often establish investment mandate targeting specific geographic regions or industry sectors.
- It can often provide regular reporting to scheme investors about investment performance and portfolio holdings.
- It can often calculate unit value or share price based on net asset value of underlying investments.
- It can often charge management fees based on assets under management and sometimes performance fees.
- It can often distribute investment income and capital gains to scheme investors.
- ...
- It can range from being an Open-End Collective Investment Scheme to being a Closed-End Collective Investment Scheme, depending on its investment fund structure.
- It can range from being a Passive Collective Investment Scheme to being an Active Collective Investment Scheme, depending on its investment management approach.
- It can range from being a Retail Collective Investment Scheme to being an Institutional Collective Investment Scheme, depending on its investor access type.
- It can range from being a Domestic Collective Investment Scheme to being an International Collective Investment Scheme, depending on its investment geographic scope.
- ...
- It can integrate with Custodian Service for investment asset safekeeping.
- It can support Distribution Platform for investment product marketing.
- It can connect to Transfer Agent System for investor record-keeping.
- It can utilize Fund Administrator for net asset value calculation.
- ...
- Examples:
- Collective Investment Scheme Types, such as:
- Mutual Funds, such as:
- Equity Mutual Funds investing in stocks for capital appreciation.
- Bond Mutual Funds investing in fixed income securitys for interest income.
- Balanced Mutual Funds investing in both stocks and bonds for balanced returns.
- Money Market Funds investing in short-term debt instruments for capital preservation.
- Exchange-Traded Funds, such as:
- Index ETFs tracking market indexes for passive investment.
- Sector ETFs focusing on specific industry sectors.
- Global Index ETFs tracking global market indexes for global diversification.
- Unit Trusts, such as:
- Property Unit Trusts investing in real estate assets.
- Equity Unit Trusts investing in stock portfolios.
- Fixed Income Unit Trusts investing in bond portfolios.
- Investment Trusts, such as:
- Real Estate Investment Trusts investing in income-producing propertys.
- Split Capital Investment Trusts with different share classes offering varying risk-return profiles.
- Hedge Funds, such as:
- Long-Short Equity Hedge Funds using long-short strategy.
- Global Macro Hedge Funds trading based on macroeconomic trends.
- Event-Driven Hedge Funds trading around corporate events.
- Private Equity Funds investing in non-public companys.
- Venture Capital Funds investing in startup companys.
- Collective Trust Funds for qualified pension plans and trust accounts.
- Mutual Funds, such as:
- Collective Investment Scheme Structures, such as:
- Collective Investment Scheme Jurisdictions, such as:
- US Collective Investment Schemes regulated under Investment Company Act.
- UK Collective Investment Schemes regulated under Financial Services and Markets Act.
- EU UCITS Collective Investment Schemes regulated under UCITS Directive.
- ...
- Collective Investment Scheme Types, such as:
- Counter-Examples:
- Direct Investments, which lack pooled investor money and collective investment advantages.
- Individual Security Investments, which lack professional management and built-in diversification.
- Segregated Accounts, which maintain separate ownership of investment assets rather than pooled ownership.
- Direct Participation Programs, which provide direct ownership interest rather than fund shares.
- Investment Clubs, which typically lack professional management and regulatory oversight.
- See: Investment Vehicle, Economies of Scale, Diversification Strategy, Portfolio Management, Investment Regulation.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/collective_investment_scheme Retrieved:2014-7-13.
- A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group. These advantages include an ability to:
- hire professional investment managers, which may potentially be able to offer better returns and more adequate risk management;
- benefit from economies of scale, i.e., lower transaction costs;
- increase the asset diversification to reduce some systematic risk.
- Terminology varies with country but collective investment vehicles are often referred to as mutual funds, investment funds, managed funds, or simply funds (note: mutual fund has a specific meaning in the US). Closed-end funds are a special type of collective investment scheme in the U.S. which is offered to the public, but not redeemable. [1] Hedge funds and other private funds are not sold publicly, [2] while collective and common trust funds are unique bank-managed funds structured primarily to commingle assets from qualifying pension plans or trusts. [3]
Collective investments are promoted with a wide range of investment aims either targeting specific geographic regions (e.g. Emerging, Europe) or specified industry sectors (e.g. Technology). Depending on the country there is normally a bias towards the domestic market due to familiarity, and the lack of currency risk. Funds are often selected on the basis of these specified investment aims, their past investment performance and other factors such as fees.
- A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group. These advantages include an ability to:
- ↑ Lemke, Lins and Smith, Regulation of Investment Companies, §4.04[1][b]; §9.05 (Matthew Bender, 2014 ed.).
- ↑ Lemke, Lins, Hoenig and Rube, Hedge Funds and Other Private Funds: Regulation and Compliance (Thomson West, 2014-2015 ed.).
- ↑ Lemke and Lins, ERISA for Money Managers (Thomson West, 2014-2015 ed.).