Syndicate
Classification of Investment Funds
We find that there are two possible classifications for funds. According as to how they are used, first, as how the investors receives profits and, second, as for the kind of investment done by the fund, as how the investor receives the profits:
- Profits or distribution: In this type of fund the benefits from the account of the institution are distributed periodically between the participants in form of dividends, as a regular flux of returns
- Capitalization or growth: all the profits obtained are reinvested on the capitals of the fund.
As for the Type of Investment Realized by the Fund
- Collective Investment Institutions with Financial Character:
- Unregistered securities investment funds
- They are funds whose portfolios maximum expiration has no limits.
- The investment are composed the majority by shares, debentures and public funds. We can distinguished:
- Fixed interest unregistered securities investment funds: they are those whose capital is invested in an exclusive way in fixed term assets (bonds, debentures, promissory notes, etc.) with medium life of approximately 3 or 5 years. Its profitability is very bound to the evolution of the types of interest in a way that if these types of interests are on rise they can suffer, in s transitory way, draw backs in its liquidity value. However, but generally they are usually very stable.
- Its most outstanding characteristic would be, theoretically, its greater security instead of its profitability.
- Variable interest unregistered securities investment funds: this kind of funds in at least 70% of its portfolio is composed of securities with variable interests. The rest are securities of fixed interests. The level of risk assumed is superior to that of the movable fixed interest investment funds due that it is composed in majority by shares, which are exposed to suffer from the fluctuations of the stock exchange market. In spite of being considered as prototype of risk savings, it is characterize for usually having a high long-term profitability.
Mixed unregistered securities investment funds: there are two types:
- Of mixed fixed interests: they are considered as very conservative for having in its portfolio more than 75% of securities of fixed interests. The combination of fixed and variable interests offers the security of investing in fixed interests assets and the higher profitability that can be obtained on the stock exchange market.
- Of mixed variable interests: that have from 25% to 70% of its portfolio invested in securities of variable interests, and the rest in securities of variable interests, and the rest on securities of fixed interests.
- These types of funds try to cover part of the risks assumed in its participations on the market with debt emissions.
- For foreign currency unregistered securities investment funds
- In these type of funds the investments can be realize so much in securities of variable interests as fixed interests, but its assets are denominated in foreign currency. It offers the advantage of an international diversification due to the investments done in foreign markets.