ALFI published the next two podcasts in its educational series “Basics of Investing” entitled “How does a UCITS fund work?” and “How can UCITS funds protect investors?”. These are the final podcasts in the first series dealing with investing and investment funds.
Denise Voss, Chair of the ALFI Investor Forum, says: “Investor protection lies at the very heart of UCITS, the ‘undertakings for collective investment in transferable securities’. ALFI has focused its efforts on deepening investors’ knowledge of investment funds, and UCITS in particular, as an ideal investment product to help individuals meet their financial goals. Hence, providing information on UCITS investor protection features is vital and we hope that this series of videos will provide simple explanations about investing in UCITS, which can otherwise seem complicated to many people.”
With its series of podcasts, ALFI strives to contribute to improve financial literacy which needs to be strongly improved across Europe, according to a report published earlier this week by the European Fund and Asset Management Association (EFAMA). This analysis confirms widespread ignorance of financial matters, with consumers baffled by concepts such as interest rates and inflation. While understanding of risk and risk diversification is important and affects financial decisions, only a minority of individuals have a good grasp of risk diversification, one of the main benefits offered by UCITS funds.
How does a UCITS fund work?
In this podcast, ALFI summarises the benefits of investing in the European investment fund that was designed for retail investors, known as UCITS. These benefits include a high level of investor protection, diversification, professional portfolio management and high liquidity.
Denise Voss says: “UCITS make it easy to spread the risks related to your investment and to avoid the concentration risk that exists when investing in a single security. Even with a small amount invested, with UCITS you have access to a diversified portfolio of assets – something which is not possible with direct investment.”
Another important factor is choice. Denise Voss continues: “Today, the choice of investments within UCITS funds is broad. Investors can choose from a variety of funds that meet their investment needs and appetite for risk, ex. equity funds, bond funds, money market funds, funds investing in one or more asset classes, specific sectors (manufacturing, consumer products, etc.) or regions of the world.”
How can UCITS funds protect investors?
Investor protection is one of the cornerstones of UCITS law. ALFI’s final podcast in this series explains how UCITS funds protect investors.
The video analyses several aspects of investor protection associated with UCITS funds, such as the type of assets UCITS can invest in, investment limits, risk management requirements, safekeeping of the UCITS’ assets, supervision and last but not least – readily available and up-to-date information about the UCITS.
Denise Voss concludes: “Investor education is one of ALFI’s main priorities and we regularly update our website with valuable information for retail investors within the Investor Centre section (www.alfi.lu/investor-centre). This information is available in four languages. The ALFI Investor Forum is now preparing the next series of podcasts, which will focus on what investors should do before investing.
ALFI podcasts “Basics of investing” are available here:
The following topics have been covered:
- Saving and investing – what should you do with your money
- What are equity, bond and real estate assets
- What is an investment fund
- What is a UCITS fund and why should I invest in one
- How does a UCITS fund work?
- How can UCITS funds protect investors?