As we have seen in our review of UCITS, this type of investment fund may only invest in securities, i.e. in shares, bonds, debt securities, short term treasury instruments and cash.
Investment funds which are not UCITS – and which are generally referred to as “alternative investment funds” – can, however, invest in an almost unlimited variety of goods. The only (practical) condition is that these assets generate more or less regular income and / or offer the chance that their value increases with time.
Thus, real estate funds invest, as the name suggests, in real estate, usually commercial property such as office buildings and shops that produce regular income (in the form of rents) while offering the opportunity to generate capital gains if property prices rise.
Venture capital or “Private Equity” funds invest in young companies whose future is promising but uncertain and who are not yet listed on a Stock Exchange.
Funds of funds are even investing … in other investment funds.
Precious metal funds invest in one or more precious metals whose prices fluctuate frequently and quite sharply according to supply and demand, particularly from industry
Commodity funds invest in agricultural products or natural resources.
Microfinance funds use the funds they collect to provide loans to micro-entrepreneurs, mainly in developing countries.
Other funds invest in collectibles such as works of art, antiques, jewelry, watches, vintage cars or noble wines…
Recently, a European Directive created a legal framework for “European Long Term Investment Funds” (ELTIF) involved in collecting funds to finance large infrastructure projects in the European Union.
The investment strategies pursued by funds are as versatile as the funds themselves.
We’ll take a closer look at these strategies in our article “How do investment funds invest?”