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How fund types can be distinguished

There are various possible classifications for structural presentation. All of the following classifications can naturally overlap. One and the same fund can be

•     open-ended fund as well as
•     equity fund and
•     theme fund at the same time.

Many other overlaps are conceivable.

Classification according to the right of redemption

Depending on whether an investor can return his units at any time or only after a certain period of time, a distinction is made between open-ended and closed-ended investment funds.

Open-ended investment funds. Here the investor can return or sell his acquired fund units to the issuing fund company at any time. The fund company is obliged to redeem all fund units at the so-called daily NAV (net asset value). Many open-ended investment funds are also admitted to trading on the stock exchange and can be bought or sold there. Open-ended investment funds are more common than closed-ended funds.

Closed-end investment funds. They are characterised by the fact that fund shares can only be purchased once. After that, the fund is closed. Before the end of the term, the fund company has no obligation to buy back the shares. It is almost impossible to sell the shares before the end of the fund's term, as there is no stock exchange for closed-end funds due to the different contractual arrangements.

Most closed-end funds usually involve special investment objects such as real estate or merchant ships. Closed-end funds have often come under criticism due to their lack of transparency and poor performance.

Classification according to investment products

The distinguishing feature is the composition of the fund assets. In which investment products are the fund assets invested?

Equities (equity funds): Here the fund manager invests in equities. Due to the large selection of different listed companies, an equity fund can focus on the entire stock market or on individual sub-sectors, such as shares in specific industries or regions.

Bonds (bond funds): Fund managers of bond funds invest in interest-bearing securities with different maturities and interest rates in download exness. As with equity funds, it is possible for a bond fund to focus on specific sub-sectors of the bond market, for example high-yield bonds. Basically, investments can be made in government bonds and/or in corporate bonds.

Equities and bonds (mixed funds): Mixed funds invest in both equities and bonds. A wide variety of focal points can be formed in the composition of the fund assets.

Commodities (commodity funds): Concentrate on the asset class "commodities". The fund assets can be invested in commodities directly as well as in shares of companies that are active in the commodities industry.

Money market (money market funds): Money market funds are funds that invest primarily in securities with a short remaining term. These include bonds with a remaining term of less than one year as well as overnight money and time deposits. Money market funds are mainly used by institutional investors to park liquidity in the short term. Private investors can use a call money account in this situation and are therefore not dependent on money market funds.

Fund units (fund of funds): Invest the fund assets in other funds. You can invest in equity, bond, mixed or other types of funds mentioned. The capital is spread more widely in a fund of funds than in an individual fund. In return, however, the investor also has to bear higher costs.

All investment products (hedge funds): Are not subject to any special investment guidelines and can use all forms of capital investment. Among other things, derivatives are also used for hedging purposes. Hedge funds are generally riskier than normal investment funds and are often reserved for institutional investors only.