UCITS or Undertakings for Collective Investment in Transferable Securities take two forms: Mutual Funds and Sociétés d’Investissement à Capital Variable (open-ended investment companies). FCPs are co-ownerships of shares or bonds. As for SICAVs, they are public limited companies whose objective is to manage a portfolio of bonds or shares. Many investors choose these vehicles to invest on the stock market.
What is an open-ended investment company ?
A OEIC belongs to the UCITS family. It is a genuine public limited company that guarantees the management of a portfolio of securities. Its purpose is to ensure the pooling of the benefits and risks of an investment in property or debt securities. Legally, it has legal personality. It has shareholders and a Board of Directors. This company is created by a custodian or a credit institution called a promoter. Open-ended investment companies delegate management to an expert to enable investment on all markets. They follow strict management rules to reduce the risks for subscribers. They ensure minimum diversification. To invest on the stock market, it is interesting to choose this savings product.
General information about mutual funds
A Mutual Fund is a co-ownership of securities divided into units. A number of investors deposit funds and subscribe for units. Then, all the funds contributed will be managed by the management company. However, Mutual Funds must be approved by the Autorité des Marchés Financiers. The latter verifies the fees, redemption and subscription terms, management guidelines, etc. A mutual fund is called FIA if it complies with the AIFM Directive. It may be called a UCI if it complies with UCITS regulations. On the other hand, this name is not likely to change the way it operates. Secondly, a FCP offers a lower outstanding amount than an OEIC. The latter has more contracted management styles and covers more varied markets than the open-ended investment company. The performance of a FCP appears to be more disparate than that of an OEIC
Why invest in FCPs and SICAVs?
The FCP and OEIC are savings products of the UCITS family. Their purpose is to simplify and facilitate access to the stock market. If an investor chooses to invest in a FCP or an OEIC he entrusts his fund to a specialised manager who is able to guarantee the management of his assets. To increase the value of his securities portfolio, this expert ensures that arbitrage is optimised. He manages the operation consisting of selling the security in order to repurchase more interesting ones.