The assets management is the process for professional business of Assets Management Company (hereinafter referred to as AMC). So, AMC, having the special license, opens (registers) the corporate investment fund, then places the fund’s shares among investors and invests the attracted money into projects. After finishing the activity AMC leaves the project that is sells the fund’s asset, receives the money and repurchases the shares at investors. This entire process may conditionally called the assets management, although there are many variations how it takes place.

What are the collective investment schemes?

Collective investments institutions (CII) are the investments funds, which accumulate the money of investors for further receipt of profit through its investment into securities of other emitters, corporate rights, real estate and other assets. In Ukraine CII include the share and corporate investment funds.

What is an amc?

An assets management company (AMC) is a legal entity, which performs the professional activity in assets management of collective investment institutions (CII) pursuant to the license that is issued by Securities and Stock Market State Commission, and cannot combine this activity with other kinds of professional activity in stock market. AMC performs the assets management of CII for remuneration. The activity of AMC is strictly governed and limited by legislation and Securities and Stock Market State Commission.

What are investment funds?

A share investment fund (SIF) is the assets that belong to investors pursuant to joint partial ownership and are managed by AMC and accounted separately from results of its economical activity according to legislation. AMC invests the attracted money into profitable financial instruments: shares, bonds, state securities, precious metals, bank deposits, real estate, etc. As a result from efficient management there arises the profit (or it does not arise as a result from inefficient management or negative result of stock market in general) that is distributed between all investors according to the portion of their investments (number of purchased investment certificates).

A corporate investment fund (CIF) is a legal entity, which is established in the form of joint stock company and performs its activity exclusively in joint investment. AMC also manages CIF pursuant to assets management contract. As well as SIF, the attracted money is invested into various assets, after completion of activity CIF and SIF sells their assets and settles with investors and is wound up.

Classification of investment funds

Depending on procedure for implementation of activity: open, interval, closed.

Placing and repurchasing the securities of open fund takes place every day that is an investor on any working day may both buy and sell the fund’s securities. The main peculiarity of this fund is the sound liquidity. Accordingly, an open fund as the most liquid instrument requires the availability of the most liquid instruments in its assets.

An investor may buy and sell the securities of an interval funds only during the period (interval), defined in the fund’s emission prospectus, according to the law – not rarer than once a year. Most such funds place and repurchase the securities significantly more often. Open and interval funds are as a rule termless (established for an unlimited period of activity).

A closed investment fund may be only at a fixed term. According to legislation neither AMC, nor fund itself shall repurchase the securities at investor of such fund until closure of CII. But hereby the securities at fund of closed type may be in free circulation in the market – they may be gifted, sold to any third person, used as a warranty, etc. Depending on composition of assets: diversified and non-diversified.

Diversified funds are strictly controlled in relation to directions and volumes of investments into some or other asset. Investment funds of open and interval types may be only diversified.

Non-diversified funds are the investment funds in relation to which there are no strict requirements to diversification of assets. They may make the investments into securities, real estate items, corporate rights, etc.

Venture funds are the corporate or share non-diversified investment funds that perform only the private placement of securities, emitted by them, and run rather risky investment strategy, in particular, into innovative projects.

What is the profit of investor (shareholder)?

The profit of investor consists of increment in cost of fund’s securities that are accrued for securities of CII.

An investor may sell its profit only in case of sale of shares or investment certificates that belong to it or having received the dividends. If an investor sells the securities to the fund itself or AMC, so, the price is formed taking into consideration the cost of share/investment certificate of fund as of repurchase. In order to know the cost of share/investment certificate it is necessary to divide the cost of fund’s net assets by a number of fund’s shares/certificates that are in circulation.