Fund of funds
As a fund of funds (english fund of funds ) are mutual funds referred to invest the money of the shareholders again in units of investment funds. The funds invested in by the fund of funds, referred to here as target funds. Mutual funds that invest in both individual securities such as stocks or bonds or in mutual funds are sometimes called in distinction to the roof fund super fund. There are also specialized fund of funds, which focus on a particular asset class or a specific topic. These include, inter alia, Funds of hedge funds. These invest in individual hedge funds.
Basically, a fund of funds registered in Germany all also approved in Germany investment funds are open to the funds of funds are not even (to avoid cascading effects ), special funds or closed-end funds. A single Target Fund may not exceed a 20% share of the total assets of the fund of funds. In addition, a fund may not hold more than 25 % of the shares in the assets of the Target Fund. These limitations are to be understood as lessons learned from the collapse of the first fund of funds FOF ( Fund Of Funds), which was launched in 1962 by the Company Investors Overseas Services (IOS ). In the 1970s, the FOF went bankrupt due to concealment, embezzlement, and a kind of Ponzi scheme. After these events, fund of funds have been banned in Germany and rearranged until the 3rd Financial Market Promotion Act of 1 April 1998.
Opportunities and risks
Through the fund of funds structure of the fund manager of the fund of funds can each be covered market segments occupy the most attractive each fund. In this way it can be shown virtually any risk-return profile. For the investor, there is an advantage in a broadly diversified and actively managed portfolio. It can not be spread only on individual securities, but also through various fund managers and fund companies. Important to this diversification aspect, however, is on the one hand, the independence of the fund of funds management, so that it is ensured that not amplified fund a particular house to be considered. On the other hand, diversification is also a requirement for the risk management of the allocation so that no strong overlaps arise that run counter to the diversification or even arise cluster risks.
The fund of funds manager can draw on funds that go far beyond the usual range of unit trusts, such as those offered by banks or fund platforms, beyond. If the roof fund also holds shares in now-closed to new investors funds (eg due to an acquired volume ) concerns here for the investor the opportunity over the roof fund assets at attractive investment ideas to participate, that was not actually open to him as a private investor. To be distinguished is the umbrella fund of a master fund in which an institutional investor can manage various specialized asset manager sub-portfolios of a fund.
Costs and benefits
Funds have a reputation for being particularly expensive forms of management. It is undisputed that it as described above, an additional level of management fund of funds manager also manages the target funds out there that goes along with costs. This additional level of management but on the other hand, other conditions as a money manager, or even a private investor who manages his portfolio with mutual funds active themselves. The fund of funds makes his purchases and sales in the investment company of the Target Fund, to be invested in, usually at the net asset value, ie without the usual in retail sales premium. Some fund companies emphasize, moreover, that at the acquisition of so-called "Institutional Shares" is to be calculated with discounted management fees, and are credited by the target funds distributed portfolio management commissions the fund of funds assets to achieve a lean cost structure. Some funds of funds management work with performance-based fee models, a so-called performance fee. However, it is not by assigning clear that an additional level of management must become eligible for funds of funds, this takes the form of fees, which inevitably reduces the net rate of return of investors.
Due to the accumulating fund management fees the fund managers of the majority of the funds can not be compared with individual funds, or even compete with it in their charges. It is to note that such a comparison also did not take place on the same level - the fund of funds diversified as shown above on funds and fund managers, while the individual funds, this width can not have. Beyond the funds operate some fund asset management comparable to a fund of funds structure. Against this, comparable fund asset management, not just cost benefits but also transparency advantages are, however, generally yield. According to scientific findings, the net benefit of an actively managed fund has not been established in general. It is much cheaper to diversify through index funds and ETFs. Therefore, the FAZ comes in an article on the assessment of " fund of funds usually not worth it. "
"Renaissance" of funds since 2007 in the face of changes in taxation
The occurring with the introduction of the flat tax from 2009 changes in the tax treatment of capital gains have often led to new funds were launched or fund asset management companies were transferred to the fund of funds.
Background is that gains are not taxed on the sale of securities that have been acquired up to 31 December 2008 and held at least one year. Gains that can be achieved within a mutual fund are not subjected to the level of a taxable in Germany private investor taxation. Ordinary income such as interest and dividends are as they have at the time of the influent also taxable investment funds, as they are attributed to the investors from that date.
Basically, there is no tax benefit of an umbrella fund with respect to an investment fund that invests in individual values. Compared to a fund asset management but offers about the fund of funds structure, the ability to continue to collect the gains arising from the active management based on the target funds tax-free. This is not possible with investing in individual funds: This tax is paid each time when an investment in a fund reduced or completely resolved because at that moment realized gains at the level of the investor and continues this also be taxed. For this, the investor has the opportunity to influence the structure of its portfolio.
Also for investment after 2008 is that gains in an investment fund at the investor level during the holding period of the Fund are not taxable. Only with the sale of fund shares accrue to the investor to a total taxable income from capital gains. From this can " compound interest effects " in the reinvestment of the otherwise taxable portion of the retained income result.