Investment trust
Investment companies are companies that collect cash from investors to invest in accordance with prescribed these principles in various asset classes (for example, securities, real estate, or commodities).
Basics
In most countries, the law on investment companies tailored legal forms such as the widespread European investment company with variable capital ( investment company with variable capital ) before, can in principle but an investment company have any legal form. For example, investment club investment companies, which often have the form of a civil law in Germany or simple society in Switzerland. While closed-end funds have a predetermined volume of investment, investment companies can grow arbitrarily by issuing new shares with variable capital. The value of each share is always equal to the current fund assets divided by the number of issued shares. The power absorbed by the issue of shares money will be used ( eg, stocks and bonds), real estate, money market securities or other assets to purchase a portfolio of securities. If the value of the portfolio, so the investor benefits, because its share is worth more. If the value falls, he shall bear the loss. Depending on the legal form of the fund's assets belongs directly to the investor (for example, in the case of investment clubs ), or the fund company (for example, in the case of a corporation ) to which the investor holds his share. In a taxable according to the principle of transparency, investment company, the fund's assets for tax purposes but treated as a direct investor's investment in any case.
Does the investor fixed assets only indirectly, in addition to investment risk, there is a so-called issuer risk. Not only is there the risk that the value of the system is reduced, but also that the investment company is insolvent. This risk exists in particular if an investment company manages several funds, pursuing other business activities, or otherwise liabilities received. In the case of investment companies (KAG ) (one in German law specifically regulated GmbH or AG, the shares of which she founded funds to investors in exchange for money issues ), the investor is protected by the legal concept of the fund, which the separate viewing of the different emitted investment instruments prescribed and thus minimizes the credit risk.
In Germany, as in many other countries, investment companies often require permission from state authorities before being allowed to commence their operations, and are monitored by the relevant Financial Supervisory Authority. With revisions of a fund this must also be approved, as well as the prices of the shares must be published regularly.
Investment companies based in different countries are often grouped into a group of companies. European groups often consist of an investment company in the home country of the parent company and another in Luxembourg and / or Ireland. In such groups, and societies can be present, which lay not fund itself, but related activities provide (see below " business operations of investment companies "). Sometimes the whole group of companies is referred to as an investment company. Also, the holding company that is at the forefront of such a group and itself operates no operating business is sometimes referred to as an investment company.
Supervisors
Law on Integrated Financial Services ( FinDAG, PDF, 122 kB)
Law on Investment Undertakings ( IUG) Act
Regulation on Investment Undertakings ( IUA ) Regulation
Foreign investment associations are available at the German fund association BVI world. A collection of state regulatory institutions can be found with links under list of financial supervisors.
Government control of an investment company
State control of an investment company depends on the country where the company is resident. For they must comply with the applicable legal provisions in the country. The conditions such as the Securities and Exchange Commission (SEC) in the U.S. are in many ways more relaxed compared to the requirements of the Investment Act in Germany. For example, it was not allowed until 2004 to launch hedge funds in Germany. In the U.S., this type of fund was allowed much earlier. Even fewer or no restrictions has to fulfill an investment company which has its registered office in a so-called offshore area, such as in the Cayman Islands. This is subject to an investment company in general no external control as she manages the money of their investors.
In Europe, minimum requirements for the state supervision of investment companies in Directive 85/611/EEC shall apply. However, this directive does not cover all types of investment companies and funds.
Business processes in an investment company
An investment company often works with various financial service providers. Every single service provider can be a different company. The fund accounting is often performed by a service company. A Custodian provides safe custody of fund assets. In addition, the Custodian supervises the operations of the investment company. For this purpose, it is in Germany according to § Investment Act § 20 et seq committed. The checks to be carried by the Custodian relate to, among other things, the legality of the shops, the correctly calculated price, collateral management, investment compliance and market justice. The management of share accounts of individual investors and the payment is usually performed by various banks. Some funds have an external advisor, advising the investment company for individual purchases or sales of the Funds. The management of the Fund's portfolio can also be completely outsourced to an appropriate third party. A broker executes the securities from trading on the stock exchange. The sale of mutual fund shares to the customer is usually performed by several marketing partners.
Special funds
A German legal term for mutual fund is a special fund. The Investment Fund is the investment capital of fund investors, which - as the name suggests - is separate from the assets of the investment company. Thus, each fund is protected by both the changes in value of the other funds of the investment company, as well as from the grasp of investment company itself or its creditors (even in bankruptcy case).
The Investment Act ( Investment Act ) distinguishes between institutional funds and mutual fund. Special funds are investment funds whose shares are held by the investment company, based on written agreements between institutional investors. All other investment funds are mutual fund.
The fund consists, according to circumstance of cash on hand, stocks, subscription rights, pensions, claims arising from dividend payments, real estate, precious metals, etc. It is regularly assessed with the market.
The value of the fund's assets always equal to the sum of the weighted with the current redemption price of shares.
A special case exists when the Fund is not itself the owner of the investment company, which in turn manages it. Then, the Fund is liable in an insolvency of the investment company with the capital invested in them. Despite this adverse at first glance facts has been shown in practice that this construction also has significant advantages: The investment company has no incentive to increase the fees of financial gain, as they were about to flow back to the owner, so back to the fund itself and thus the higher fees would be reversed.
The separation of the fund from the assets of the investment company is ensured, inter alia, that the repository must be performed by a custodian.
The investment company (KAG ) controls the investment policy of the fund, by initiating purchases and sales. However, it has no direct access to the assets. Your intentions (buy and sell orders ) it shares with the custodian of the fund, which then publishes for example, funds or securities of the fund. The issue and redemption of fund units is carried out by the Custodian. The Custodian, however, has no influence on the investment decision.
A special case is the pension funds ( " AS- Fund").
Mutual funds are always portfolios of various assets ( stocks, real estate, etc.). But (financial) portfolio does not always have to be funds.