What is an open-ended investment fund?


Investment funds are a collective investment form, the results and activity of which depend on many entities - not only the management board, but also, among others, investors, distributors or entities responsible for supervision.

Investment funds can be divided into several aspects. The most important include the type: open and closed, the type of assets: investment and bond, and the area of investment - Poland and abroad. In the text we will focus on open-end funds (CIF).

CIF funds are by far the most popular type of investment funds. They allow you to sell and buy participation units literally on call and without limits, and units are valued every working day.

Open-ended investment funds are managed by TFI (Investment Fund Companies), e.g. BPH TFI. The role of associations is to establish funds for life, collect all permits, prepare information documents, create appropriate infrastructure and tools to manage and run funds and assets.

What investment policy is conducted within the funds and sub-funds depends on the umbrella (a group of several sub-funds managed by the company). In accordance with its policy, the open-ended investment fund has well-defined objectives related to trading in shares, bonds and other instruments. The amount of assets purchased, valued daily, depends on the amount of capital contributed by investors. Fees for running the fund (commission) are collected on the basis of the value of assets.

Purchased units can be of different classes. The difference lies mainly in the amount of fees that companies charge for managing them. As a general rule, the greater the amount of capital invested, the lower the management fee is offered by companies. However, smaller and medium investors pay normal rates. This is indirectly linked to another rather specific feature of investment funds. Societies can accept extremely small amounts for the acquisition of participation units.

The funds may be distributed by the company itself or through external institutions. Societies often provide appropriate trading platforms that enable stakeholders to place orders.

More often, however, the distribution of open-ended investment funds is handled by banks, intermediaries and financial agencies, as well as brokerage houses. Each of these entities benefits from recommending the products of companies by obtaining handling fees or certain parts of fixed fees related to fund management.

Open-end funds are regulated by appropriate fraud protection tools. Apart from the Polish Financial Supervision Authority, which regulates the market, the funds are secured by: transfer agents, auditors and depository banks. These mechanisms minimise the potential for manipulation and illegal activities.

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