What are Collective Investment Schemes?
Collective Investment Schemes (CISs) are private financial arrangements. They pool resources of many small savers, generating a large pool. The resources are then invested in various assets like shares, bonds, property and treasury bills with the sole purpose of generating high returns while minimizing risk through diversification of investments.
Collective Investment Schemes (CISs) provide a means for mobilisation of savings and enable small investors to participate in capital markets. CISs widen the choice of investment vehicles, involve the public in the process of investing in securities through pooling resources together, which are then invested by professional managers.
Types of CISs
There are currently two types of schemes in Uganda:
1. Unit Trust Schemes
These are types of schemes where investors buy units, which represent the various holdings of the scheme.
The main duties of a fund manager include:
The functions of the trustee include the following:
Why invest in unit trusts?
Who Manages CISs
The investments are selected and managed by professionals, known as fund managers in the case of Unit Trusts. Investors are therefore not involved in the day to day decisions concerning how their money is invested.
The investors pay a fixed percentage of the return to the fund manager . The scheme therefore makes money by managing other people?s money. Investment income and capital gains generated by the scheme are passed on to the investors and are shared in proportion to the investors? holding in the CIS.
Advantages of Collective Investment Schemes
The attraction of CISs in developed countries has been attributed to five main factors, risk, access to securities investments, cost, professional management and regulation.
Terms Commonly used in Collective Investment Schemes
Investment advisor: A person who provides advice in relation to the company giving the advantages of investment opportunities or information that assists a potential investor to make an investment decision.
Is a person licensed by the Authority to undertake, on behalf of the client the management of a portfolio of funds .
A unit trust is an investment scheme that pools savings of the public who share the same financial interests. The pooled savings are then invested in securities such as shares, bonds and other authorised securities.
Individual or company who holds the assets of a collective investment fund on behalf of its investors, who are the beneficiaries of the trust.
Funds managed on behalf of clients at the discretion of a fund manager
Agreement between a Fund Manager and an Authorised Corporate Director (ACD)
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