Investment Funds | What Are The Main Investment Funds?

An investment fund, or investment fund, is a company that places capital to develop promising business projects. Investment funds can be public or private. They make these investments with the aim of obtaining profits in the short, medium or long term. Investing is not without risk. For companies, investment funds can be an interesting option to be able to quickly develop a project.

Investment Funds | What Are The Main Investment Funds
Investment Funds | What Are The Main Investment Funds

Investment Funds: Definition

An investment fund is a company whose activity consists of raising capital to invest it in business projects, in order to earn a profit. They are also called investment funds. They can be public or private. Thus, they are found in structures as diverse as banks or financing organizations. They can also be individuals.

Capital can take various forms. We find for example:

  • Securities
  • Shares
  • Obligations
  • Financial resources

When you want to invest your money, you often turn to investment funds. These companies are responsible for looking for profitable projects to invest the money entrusted to them. The goal is obviously to obtain interest or in other words, a return on investment.

Very often, investment funds are specialized. For example, they can work with companies that are just starting up, this is called venture capital. They can also go instead to promising companies that wish to develop their activities, this is called development capital. There are also funds that specialize in company takeovers or that intervene when a company is going through a period of transition: this is the LBO, for leverage buy-out.

What are the main investment funds?

There are different investment funds, of which here are the main ones.

Equity funds

These funds specialize in investing in stocks. As the value of shares follows the price of the stock market, this type of investment is generally quite risky. However, it also yields a higher profit.

Bond funds

These funds specialize in the placement of bonds. These can be government or corporate bonds. Like stocks, they generally provide a higher return than other funds.

Savings fund

These devices consist of blocking your money for a long time. To get an idea, it is ten years minimum.

The risk of losing your investment with these funds is low. The guaranteed income is stable but low.

Real estate funds

Real estate funds are companies that allow you to invest your money in:

  • Real estate or land companies
  • Buildings
  • Land

The main interest of real estate investments is that they benefit from tax advantages.

Money market funds

These funds specialize in short-term monetary investments. In other words, you invest your money in government or corporate debt. There are for example:

  • Treasury bills issued by the States
  • Bank certificates of deposit
  • Cash certificates

These investments are relatively safe. However, the yield is very low.

Mixed funds

These funds consist of several different types of investment funds. Mixed funds are a way to secure your investments.

You can thus invest part of your capital in risky funds and another part in more stable funds. In this way, we are sure not to lose all the capital invested.

Why use an investment fund?

It is common for a company in creation or development to need to finance its projects. There are different ways to obtain funding: personal resources, loans and credits, grants, etc.

However, these methods may be slow or simply not sufficient. Using an investment fund then appears to be an interesting option. Indeed, investors make an injection of capital which often allows the company to quickly realize its projects. They also provide it with the benefit of their networks and their knowledge of the market. In exchange, the investment funds receive part of the company's capital. 

To attract an investment fund, the company's project must first be solid and promising. For companies already in operation, they must have a proven track record. Then, the state of the market and competition must be conducive to the realization and success of the project. Finally, the company must be able to count on a serious and professional team.

Post a Comment


Contact Form