Decades ago, people who wanted to build an investment portfolio had to enlist the services of a broker or financial institution, who would buy the securities they selected, such as shares of an individual company or government or corporate bonds. Investors had to take on the direct cost of buying and selling these assets themselves, one transaction at a time. They also had to make their own investment decisions, or appoint someone else to do so.

That all changed with the development of investment funds, and in 1985 the European Commission drew up the European Union’s first UCITS Directive. This directive provided for a uniform set of rules for creating and managing retail funds throughout the EU, opened up possibilities for distributing funds in all EU countries and also included specific measures for protecting investors. The UCITS rules required diversification of assets (so the success or failure of an entire fund would not hinge on the performance of just a few investments) and that fund assets had to be held by a custodian bank. Having proved successful for over two decades, the rules are still valid today and constantly evolving.

Other UCITS rules have been developed since the 1980s, and they continue to offer investors a cost-effective way of investing in a broad range of assets through a single transaction. Buying and selling investment fund units is quick, simple and possible on a daily, weekly or twice-monthly basis. While some investors may have time to devote to personally managing their investments, for most funds will be the most efficient way of putting their money to work.


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