What is a mutual fund and what are its functions? Mutual investment funds and their management

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Among the most accessible and stable financial instruments on the Russian market are mutual funds. They allow any willing citizen to receive income from investing in certain assets. What are the specifics of the activities of these financial institutions? What kind of income can I expect when working with mutual funds?

What is a mutual fund?

What is a mutual fund, or mutual fund? This is a special form of investment of funds in the order of collective participation of investors. It is expected that the funds will be transferred to the trust management of a special organization and the subsequent profit will be made if the work of the partners is successful.

Investing in mutual funds is carried out through the purchase of certain shares - "shares". At the same time, investors remain their owners, the management company only carries out the necessary financial transactions.

What do mutual funds give?

The main goal with which investors go to mutual funds is to make a profit. Mutual funds allow even those investors who do not have significant experience in the field of investment to earn money - the entire amount of relevant work takes onown management company. The specialists of this organization, relying on their skills and competencies, find the best options for investing the funds they manage. The management company works for a percentage of financial transactions carried out using the capital of depositors.

Legal status of mutual funds

What is the legal status of mutual funds? It can be noted that they are not legal entities. At the same time, management companies of mutual funds should be such. Mainly, such a difference in legal statuses is due to the fact that both subjects of legal relations - mutual funds and management companies - do not overpay taxes. In the case of the considered scheme of their interaction, only the proceeds received by investors in the sale of shares, as well as the fees prescribed by law from the proceeds of the management company as a business entity, are subject to transfer to the treasury.

How funds work

The Mutual Fund operates on the basis of internal rules. They fix the conditions under which investors transfer funds to the management company. The relevant organization must have a license confirming its right to manage property owned by mutual funds. This document is issued by the Federal Commission on the Securities Market. One management company can create several mutual funds.

As soon as the relevant structure receives a license from the state, it must conclude several agreements - with a depository, a registrar, an independent appraiser, and an auditor. The rules we talked aboutabove, must be entered in the registers of the FCSM. Also, a special document is subject to registration in the relevant state structure - the prospectus for the issue of shares. As soon as the management company settles all the formalities, it can begin financial activities.

The first stage of activity of the Criminal Code - the initial placement of shares. In the course of this line of work, the management company must collect a minimum amount of capital. If this was not possible, then the mutual fund should be liquidated, and the funds transferred to the depositors.

Control over the work of funds

The activities of mutual funds are subject to state control. The main body that implements it is the FCSM. Thus, in the course of developing measures to regulate the activities of mutual funds, the legislator formed some rules that the relevant investment structures must comply with.

For example, assets owned by mutual funds must be managed by one company and held by another. At the legislative level, norms have been established that require detailed disclosure of information about investments. Mutual investment fund reports also require a high degree of detail.

Is income guaranteed?

Specific activity of mutual funds does not guarantee income for depositors. The company that manages the mutual fund is obliged to redeem the units as soon as the investor so requests, but there are no legal requirements regarding profitability in relation to the structures in question. That is, despite the fact that mutual funds are positioned asfinancial instruments for investors who do not have extensive professional investment experience, it is assumed that the owners of the capital are aware of all the associated market risks.

Essence of shares

Let's take a closer look at investment shares. When the investor transfers funds to the mutual fund, he, in fact, acquires a stake in the organization. Thus, the investment share of a mutual investment fund is a personified security, which indicates that its owner is among the owners of the property of the mutual fund. This citizen has the right to expect that the MC will properly manage the investment fund. He is also en titled to compensation if the trust contract is terminated.

Pie has no minimum value. Its monetary value is expressed in terms of the fund's net asset value. That is, the cost of one taken share is a multiple of the total amount of funds of the mutual fund, divided by the number of shares. The price of the respective shares varies depending on the results of the investment. A share also cannot be considered an issue type of securities, like shares. At the same time, financial instruments of the corresponding type cannot be derivatives of shares. The total number of shares in the capital of a mutual fund is not limited by law.

Types of funds

Let's consider what mutual funds are. There are several criteria for their classification. According to one of the most common, mutual funds can be divided into 3 types: open, closed, and interval. What are their specifics?

Open ended mutual fund - financialan institution that is considered the most common in the respective category. Their main feature is the free purchase and sale of shares. The amount of capital, as well as the number of depositors are not limited. The type of mutual funds under consideration is characterized by investing in assets that are highly liquid.

Closed-end mutual funds are characterized by the fact that they sell the resulting shares when the fund is established. These structures do not redeem shares, except for precedents when a depositor makes claims to the rules of the Criminal Code. The corresponding funds are formed, as a rule, for a fixed period, which is negotiated with investors in advance. A closed-end mutual fund is a structure that often has an industry specialization. For example, its activities may be related to the real estate or innovation market. However, for example, the "First Mutual Fund of Startups" is open. Although his industry specialization is innovation.

There are interval mutual funds. The peculiarity of their activity is that the sale of shares, as well as their redemption, is carried out at fixed intervals. At the same time, interval funds mainly work with shares. Therefore, in the potential such mutual funds (reviews of many investors confirm this) can be more profitable than, for example, open mutual funds.

There is another common criterion for the classification of mutual funds - the scope of investment. Thus, the "First Mutual Fund of Startups", as we noted above, carries out activities in the field of innovation. But there are also mutual funds operating onbonds, mortgages, real goods, industry.

For example, funds operating in the bond segment invest money mainly in relevant securities issued by the state, corporations, work with bank deposits and currency. Their assets are usually not formed from shares. Mutual funds belonging to this category are considered by many analysts as not the most profitable, but very reliable, which is due to the nature of bonds, which require the obligatory payment of appropriate dividends to depositors by their issuers.

In turn, mutual funds characterized by a risky investment strategy are those that work with stocks. But at the same time, the yield in them can be incomparably higher than in funds that invest money in bonds. It can be noted that within this category of mutual funds there are additional grounds for classifying institutions. So, there are funds that specialize in investing in shares of large companies - "blue chips", and there are those that prefer to invest in the assets of newcomers.

There are mixed mutual funds. It is difficult to characterize them as leading activities in a particular segment. But at the same time, many of them combine the best qualities of funds specializing in stocks, namely high yields, and at the same time the characteristics of mutual funds investing in bonds, in particular stability. Investing in such institutions is recommended for investors for whom the relevant financial marketbrand new.

Functions of Mutual Funds

It will be useful to consider what functions are typical for mutual funds. They can be classified into social and economic. The functions of the first type are:

• providing citizens with the opportunity to earn additionally to the usual sources of income - salaries, deposits, even if they do not have specialized knowledge in the field of investment;
• promotion of financial education of the population (the investor eventually begins to understand the laws of the market that affect the success of investments);
• formation of jobs for financiers, as well as related specialists, lawyers, programmers, secretaries, sales managers.

Among the basic economic functions of mutual funds:

• increasing the capitalization of various business sectors, the financial market, which ultimately contributes to the growth of the country's economy;
• promotion of entrepreneurial initiatives - both direct (stimulating financiers with experience to open their businesses in the form of management companies) and indirect (shaping investors' attitudes to earn money by improving their knowledge and skills in the field of investment);
• provision of additional tax revenues to the budgets of various levels - at the expense of deductions from the income of depositors, as well as fees from the Criminal Code provided for by law.

Now consider the advantages and disadvantages of investing in mutual funds.

Advantages and disadvantages of investing in funds

Let's start with the advantages of depositors working with mutual funds. The most important advantage that any mutual fund has is that the capital is managed by experienced experts. If this criterion is not met, then the management company simply will not receive a license from the FCSM. This department puts forward certain requirements for the professional qualifications of the owners of the management company, certifies them in the prescribed manner. Mutual funds are usually opened by investors with experience, confident in their abilities and skills.

Investing in this type of fund is very affordable. The minimum investment amount in most mutual funds is about 2-3 thousand rubles, sometimes even less. The expected return on them can be comparable to the profit from placing deposits in banks on the conditions established for very large deposits - from several hundred thousand rubles.

Investing in mutual funds in terms of security in terms of a number of criteria is comparable to the same bank deposits, which are characterized by very high state protection. Control over the activities of the funds is carried out by a separate department, and the components of the activity of mutual funds of the procedure involve very strict monitoring. Strict state supervision is supplemented by legislative requirements, for example, those that imply the obligation of the MC to place funds in a separate depository.

Among the significant advantages of mutual funds is soft taxation. Current transactions are not subject to fees. Payment of the necessary taxes is required only when the share is sold by the investor. In turn, the conditions of the Criminal Code on commissionsusually quite acceptable for investors - as a rule, 3-4% of the capital turnover is taken.

Mutual funds also have disadvantages. First of all, a mutual fund cannot guarantee returns. At the same time, the success of the company in the past does not directly predetermine the high probability of repeating investment results. It often happens that a promoted and popular mutual fund, and it deservedly received such a status, chooses not the most optimal investment strategy, as a result of which investors are left with nothing. It may also be related to new market conditions. In addition, even if the activity of the management company is unprofitable, the client still needs to pay it for services by deducting a commission.

Among the noticeable shortcomings of mutual funds is the relatively low rate of withdrawal of funds by the depositor. As a rule, the investor has to wait about a week for cashing out. At the same time, he may have expenses associated with the need to issue special investment certificates.

Experts on mutual funds

What are the opinions of experts on the activities of Russian mutual funds? Despite these shortcomings, analysts generally consider mutual funds to be reliable, transparent and affordable investment instruments. Experts note that the activities of mutual funds are characterized by a very high degree of openness, due not only to the requirements of the law, but also to the client orientation of these institutions.

The most important thing, according to experts, is that the management of the mutual fund is carried out by professionals. There isfinancial instruments that assume that the yield will depend directly on the actions of the investor. In the case of mutual funds, they can entrust their capital to experienced people.

Experts note that investors generally trust mutual funds. For example, after the end of the 2008-2009 crisis, when there was an expected outflow of capital from mutual funds, many citizens began to return to interaction with funds as soon as possible. The dynamics of investment in many mutual funds exceeded the figures recorded before the crisis.

How much can you earn on mutual funds?

What is the expected return on investment in mutual funds? As we noted above, funds are divided into several categories - some, due to the desire to invest in shares of dynamically growing businesses, can be more profitable, others that prefer to invest in "blue chips" provide less profit. Moreover, in the first case, the probability that the investor will be left with nothing is, of course, higher.

It is extremely important how qualified the management company will approach investment issues. Mutual funds that are opened by experienced market players, as a rule, are more profitable and stable than those founded by newcomers - despite the fact that there are strict requirements for their qualification at the level of the state regulator.

On open mutual funds specializing, for example, in bonds, the average yield is about 10-12% per annum. Funds that invest in stocks can provide more returns -about 20%, sometimes more. Closed mutual funds in terms of profitability occupy a middle position between them. The Startup Mutual Fund, judging by some public data, recorded profits of several tens of percent per annum. But it depends on how much the main asset of this mutual fund increases - the capital of innovative companies. Some mutual funds of Sberbank, judging by public data, have a yield of more than 30% per annum.

Specialists in the field of financial markets recommend working with several mutual funds at once, thereby diversifying investments. It also has the potential to increase profits. It makes sense, analysts believe, to compare mutual funds in terms of commissions and other expenses that are not directly related to the receipt of investment proceeds. You can also pay attention to the characteristics of the management company from the point of view of the founders. If the management company is opened by a major market player, as is the case with Sberbank mutual funds, then its reliability is higher than that of firms that have recently appeared in the corresponding segment. Thus, an integrated approach to assessing the prospects for cooperation with a particular fund is optimal for a contributor.

Prospects for Mutual Funds

How promising can such a financial instrument as a mutual fund be considered? In general, experts assess it as having a very great potential due to the fact that the Russian economy in many ways belongs to the category of developing ones.

Many industries in the national economic system of the Russian Federation are not saturated. Moreover, in connection with the well-known events in the foreign policy arena, for many businessesnew opportunities are opening up, in particular in the field of import substitution. Even those industries that have traditionally been viewed as saturated (eg, food processing, some segments of engineering and the production of consumer goods) can receive additional incentives for growth. Therefore, financiers have a place to invest and, accordingly, management companies that own mutual funds too.

It is known that the profitability of similar structures in Europe as a whole is lower than in Russia. Therefore, experts assess the prospects of the funds as positive also in terms of the investment attractiveness of the Russian market for foreign partners. On the other hand, foreigners are quite attentive to the stability of national economic systems as a whole. The high yield of certain financial instruments, such as mutual funds, may certainly be of interest to them. But no less important factor for a foreign investor will be the stability of the economy as a whole, the strategic prospects for interaction with a particular market. Therefore, the attractiveness of Russian mutual funds will directly depend on how successfully the country's economic system develops in all other segments.

Growing Market

One way or another, according to many signs, the mutual fund market in the Russian Federation is growing, with prospects for further increase in capacity. The past crisis has shown that investors generally trust funds. As the economic situation improves at the present stage of development of the national economy of the Russian Federation,it is possible that citizens will acquire new incentives for investing in assets with the assistance of mutual fund managers. Most importantly, mutual funds are no longer perceived in the Russian Federation as an exotic financial instrument. Citizens are generally open to mutually beneficial cooperation with these financial institutions.