What is a fund?


A fund consists of a portfolio of selected securities that is managed by experts (fund managers) subject to statutory requirements concerning the broad distribution of risk.

By pooling the money of a number of individual investors, the fund has sufficient capital to invest in many securities within a defined market. Separately, the individual investors would have great difficulty or need to invest substantial amounts to achieve the resulting distribution of funds (and risk). Instead of the individual equities, the investor holds fund units that substantiate his/her share in the fund's assets

The benefits of investment funds

  • High level of flexibility: Funds can be sold and redeemed at any time and with no limit with respect to volume (note: please refer to the fund's terms and conditions for any trading restrictions)
  • It is also possible to invest small amounts in a fund
  • Anyone can invest; there are no limits on the number of fund units
  • All investors are treated equally, regardless of how much they have invested
  • Securities are chosen and the fund portfolio is constantly monitored and optimised by experts
  • Processing is handled by the investor's bank: How to Buy
  • No conflicts of interest: The management of the fund (by the investment company) and account management/administration (by the custodian bank) are kept separate
  • The management and administration of the fund are subject to strict internal and external controls
  • Documents are provided for the information of investors (e.g. annual report, fund terms and conditions, sales prospectus etc.), enabling the greatest possible degree of transparency
  • Maximum level of security in the event of the insolvency of the investor's bank, the bank charged with managing the fund (custodian bank) or the investment company thanks to the fact that funds are classified as special funds

Risks to bear in mind

  • The prices of the securities held by the fund (particularly equity funds and alternative investments) can fluctuate substantially
  • Capital losses are possible
  • For funds that invest in foreign currencies there is a risk that exchange rates will change
  • The interest and payouts for securities depend on the performance of the issuing company
  • Prices may fall if credit ratings are downgraded
  • Rising interest rates may cause prices to fall
  • The purchase of fund units involves one-off costs ("issue premium")
  • The amount of these costs depends on the fund chosen

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