Investment funds are regulated investment vehicles (some are more regulated than others) that have to be approved by and are continuously supervised by the competent financial markets supervisory authority.
The most regulated investment funds are “undertakings for collective investment in transferable securities” (UCITS), while less regulated funds include the so-called alternative investment funds (such as hedge funds or Private Equity funds). But these are in principle not intended to be offered to retail investors.
The law requires that the assets of an investment fund be separated from those of the fund initiator. The safekeeping of the investment fund’s assets must be entrusted to a depositary (which must be a credit institution). The latter takes care of the day to day management of the Fund’s assets and must ensure that all transactions that affect the shares or units of the Fund (such as the issue, sale, redemption and cancellation of shares or units, or the calculation of its net asset value) take place according to the law and the management regulations.
These provisions aim to ensure that the fund’s assets are not affected in case of financial problems or bankruptcy of the fund company.
However, like any other investment, an investment in an investment fund involves risks.