A fund consists of a portfolio of selected securities (e.g. bonds issued by European companies) that is managed by experts – the fund managers. As required by the Austrian Investment Fund Act, this portfolio is broadly diversified. That means that it invest in numerous companies and/or countries, for example. For every fund, a so-called net asset value is established frequently (at least daily). This value is based on the value of the fund’s assets. The number of shares issued by the fund is not limited, which is also why the term “open-ended investment funds” is in use.
Basic principles of investment funds according to the Austrian Investment Fund Act:
- The funds are so-called “open-ended funds”, which mean they are open to an unlimited number of investors, and new shares can be issued at any point in time
- Management is handled by a specialised institution (i.e. an asset management company)
- The funds are managed and the securities are selected by experts (i.e. fund managers)
- Broad risk diversification e.g. in securities of different issuers, countries, and categories
- Permanent (most often, daily) establishment of the net asset value
- Assets under management are split into fund shares of equal size
- Strict control of the fund management team by independent auditors
- The shareholder of the fund is a pro rata co-owner of the assets under management; the fund shares represent special assets (separation and recovery of assets in the event of the bankruptcy of your main bank or the bank assigned with the custodianship of the securities (i.e. the depositary bank))
- Utmost transparency for the investor (annual and semi-annual report, fund terms and