A fund whether it is a mutual fund, hedge fund or exchange traded fund (ETF) is fundamentally similar. A fund is a pool of money which, either directly or indirectly, allows individuals access to investments more easily than if the individual made the investments themselves. What really defines the type of fund in investing is how that fund is accessed and how that fund is managed. Hedge funds can be considered separately to other funds as they are less accessible to the standard retail investor, plus they tend not to be mandated as strictly as a mutual fund or ETF in terms of their investments.
Mutual funds and ETFs are entities which invest into asset classes/sectors/regions (e.g. equities/bonds, financials/pharmaceuticals, emerging markets/Europe) and then divide ownership of themselves into shares which are held by shareholders. Mutual funds and ETFs have evolved over the past few decades with both now offering passive and active investment approaches but there are some important differences between them.
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There are many different fund providers in the market including insurance companies, banks, investment managers and more
Each individual fund has its own costs and investment approach, although these can be quite similar between providers as the fund space has become increasingly competitive. Specialist fund providers such as Vanguard (see related article –
The man behind the ETF index revolution: John C Bogle)and Blackrock iShares hold assets in the trillions of dollars with annual inflows into ETFs in the billions.
Source: Towers Watson
At Scalable Capital we create and manage ETF portfolios for our clients. We select the “best” ETFs based on multiple qualitative and quantitative criteria to give our clients broad diversification at low cost accessing over 8,500 individual securities in 90 countries. Our clients go through an onboarding process where we understand their risk appetite and investment objectives so that we can select a portfolio tailored to them.
(1) http://www.ft.com/cms/s/0/f5e7a4ea-b61d-11e5-b147-e5e5bba42e51.html#axzz48vv2x78F
Image: Stuart Guest-Smith/ Unsplash.com
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