Collective Investment Scheme
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A Collective Investment Scheme is an investment scheme that pools money in order to benefit from the inherent advantages of working as part of a group.
- Example(s):
- See: Mutual Fund, Economies of Scale.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/collective_investment_scheme Retrieved:2014-7-13.
- A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group. These advantages include an ability to:
- hire professional investment managers, which may potentially be able to offer better returns and more adequate risk management;
- benefit from economies of scale, i.e., lower transaction costs;
- increase the asset diversification to reduce some systematic risk.
- Terminology varies with country but collective investment vehicles are often referred to as mutual funds, investment funds, managed funds, or simply funds (note: mutual fund has a specific meaning in the US). Closed-end funds are a special type of collective investment scheme in the U.S. which is offered to the public, but not redeemable. [1] Hedge funds and other private funds are not sold publicly, [2] while collective and common trust funds are unique bank-managed funds structured primarily to commingle assets from qualifying pension plans or trusts. [3]
Collective investments are promoted with a wide range of investment aims either targeting specific geographic regions (e.g. Emerging, Europe) or specified industry sectors (e.g. Technology). Depending on the country there is normally a bias towards the domestic market due to familiarity, and the lack of currency risk. Funds are often selected on the basis of these specified investment aims, their past investment performance and other factors such as fees.
- A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group. These advantages include an ability to:
- ↑ Lemke, Lins and Smith, Regulation of Investment Companies, §4.04[1][b]; §9.05 (Matthew Bender, 2014 ed.).
- ↑ Lemke, Lins, Hoenig and Rube, Hedge Funds and Other Private Funds: Regulation and Compliance (Thomson West, 2014-2015 ed.).
- ↑ Lemke and Lins, ERISA for Money Managers (Thomson West, 2014-2015 ed.).