The term SICAV ( Société d'investissement à capital variable or ‘open end investment trust’) is generally used to designate OPCVM or funds. Really, this could be considered as being an abuse of language because OPCVM have two separate legal forms : SICAV and FCP (fonds commun de placement). It has been convenient nevertheless, to tolerate this error as there is no significant difference in the financial interest of using one term rather than the other.
An OPCVM ( organisme de placement collectif en valeurs mobilières) or a fund is an extremely powerful means of managing savings. This form of support has numerous advantages as it is flexible and very useable.
In this way it can be used as much by private investors as by professionals. For the private investors who do not have at their disposal , a significant amount of savings, funds are the best means of building up capital, whilst minimizing the risks of making costly errors.
For the private investors who possess capital of several thousand to several million Euro, funds constitute one of the best ways of managing their money at the least cost on the numerous sectors and different markets whilst benefiting from the expertise of the top professionals. For a private investor funds really do constitute instruments of investment diversification confinement and mastery of risk, harnessing of expertise, and the creation of original and specific products…
Considering the advantages already mentioned, these supports are much more developed in the countries where household savings are more significant. That is the case in the USA, but equally in the most populated European countries where households use OPCVM as receptacles for their savings. (See section : ‘The market').
The European Commission focuses therefore a great deal of attention to this market and regularly publishes documents on the subject. It’s also to the E.C. that we owe one of the best definitions of a fund :
‘Investment funds allow the small investor to have access, at an affordable cost, to funds which are diversified and managed in a professional manner’.
Extract from the European Commission White paper, November 2006.
Small investors Because these products are a support for savings whose balance is not really significant in relation to the size of the financial markets.
Affordable Cost Because the fixed overheads are shared and therefor inferior to the overheads to which an individual acting alone would be confronted.
Diversified Investments Because the money of the funds is spread in numerous values, and even in numerous markets conforming to the strict rules of investment diversification.
Professional management Because the companies authorized to create products for individual investors have professional tools and practices which are not easily available to a private investor.
If one considers that compared to the size of the financial markets, all the private investors and even many businesses are ‘small investors’, funds seem an attractive way to look after your money !
But this definition is more complete if we examine two essential advantages of OPCVM :
As a receptacle of savings of millions of modest savers, (In France, more than three million), these products are closely monitored by the market security authorities, (in France, the AMF) and present a high level of security for the unsuspecting investor.
As extremely supple products ; OPCVM offer much liquidity, meaning the possibility of investing or of spreading money with often just one day’s notice, suffering no penalty, and for significant balances.
How to approach this market :
Let’s begin by stating that here we are concerned with a presentation of the funds offered to the public, as opposed to the ‘investment’ funds or to ‘private equity’, both of which are not usually accessible to the private investor.
Even if we restrict ourselves to the public funds, and considering the multitude of available products it is not possible to give a precise view of the whole world of funds.
Let’s try all the same to propose a global approach so that it is possible to identify the principal ‘blocks’.
At the most general level, funds are classified into two groups and five categories.
- Funds invested in securities, around 80% of the European market in volume.
- Other funds invested in less liquid support or according to the specific techniques (property, alternative funds , future funds, blocked funds, high risk funds
The first group, the funds invested in securities, ‘UCITS’, resemble products which generally have a strict regulatory framework. This is the product which is the most openly available at your bank or part of your life insurance contract. This site proposes to diffuse information on this product.
This group is divided into 5 principal categories according to the financial assets in which the investment funds invest and thus in function of risks that you undertake in buying them.
- Equity funds
- Bond funds
- Mixed funds – funds having at the same time, equities and bonds
- Monetary funds
- specific funds, formula funds etc.
Find out more:
On the European market: http://www.efama.org/
On the French market: http://www.afg.aso.fr
On the ‘Who does what’ glossary: glossary
On regulations, actors and checks: http://www.amf-france.org/