The Origin of Generic Funds

1. The origin of
generic funds

2. INVESCO Benelux 2
The origin of the funds
• The management of a portfolio means managing of a
risk inherent to the instrument and the risk inherent to
the market.
• The answer to the first challenge is diversificationdiversification
• The answer to the second challenge is allocationallocation

3. INVESCO Benelux 3
• A good investment is expensive, therefore pooling of
funds is a great idea
• Fund selection would comprehend
– Balance sheet analysis
– Knowledge about management
– Understanding of the commercial strategy
– Industry / sector knowledge ,...
The origin of the funds

4. INVESCO Benelux 4
Key concepts
UNDERTAKING OF COLLECTIVE INVESTMENTS (UCIT)
•The investment policy
•The investment strategy
•Tactical allocations
(Prospectus & compliance)

5. Policy means:
• The key decision as to the volatility of the investment
and the expected return
• The most important decision in function of the profile of
the customer
• Capital preservation, capital appreciations, dividend
stream,...

6. Strategy means:
• Determining the optimal way to reach objectives with a
given policy
• The basis for a floor and ceiling for the tactical changes
• cash, bonds, shares, other investments, foreigncash, bonds, shares, other investments, foreign
currencies, mature versus emerging markets,currencies, mature versus emerging markets,

7. Tactical allocations means:
• The adjustments to the percentages of investments will
depend upon:
– The economic indicators
– The financial analysis
– The market analysis
– The trend analysis
– Mass psychology
– All sort of reasons

8. Promotor
Management
company
-Initiator of the investment
(idea, concept, and so on..)
-Market analysis
-Selection of investment
consultants, investment
managers, brokers, lawyers,
auditors, depository bank,
transfer agent, distributor,
custodian)
-Board
-Management contract with
the UCI
-Invests in fonction of the
investment policy as
discribed in the prospectus
-Manages on a daily basis
the investement portfolio
-Shares
-Bonds
-Commercial paper
-Term deposits
-Derivatives
-Other UCITs
-Real Estate
-Securities …
Functions and responsibilities

9. Domiciling
Agent
Accounting
Agent
-Publication and
« control » of the
prospectus
-Notification of likely
amendements to the
rules of incorporation
-Advertising
documents for the
customers
-Calling of board and
shareholders meetings
-Financial reporting
to the shareholders
-Payment of expenses
and taxes in relation
to the domiciliation of
the UCI
-UCI’s accounting
-UCI’s evaluation
at latest quotation
-Daily Net
Inventory Value
computation
-Report and
accounts as well as
profit and loss
statements
Custody
Agent
-Compulsorily a bank
incorporated under
Luxembourg law
autorised to exercise
that type of actvity
-Responsibility to
know how and where
funds are invested in
line with going rules
-Accounting for
transactions,
commissions,
brockerage, and so on
-Executing payments
-Providing a
surveillance of the
activity of the fund
The different functions
Registration
Agent
-Registration of
purchases of
shares,
repurchasing and
transfers

10. -Execution of orders of
shareholders (purchases,
repurchase, transfers)
-Responsible for the UCI’s
account to identify the
purchaser of shares
-Accounting of orders
-Accounitng of transactional
cost and commissions
-For nominative shares the
inscription in the registry, for
bearer shares, payment
instructions
Transfer
Agent
D I S T R I B U TORS
SURVEILLANCE
External
audit
Authorities
I N V E S T ORS
Tasks and functions

11. INVESCO Benelux 11
The pro’s and con’s of funds
• Advantages
– Professional
management
– Spreading costs
– Spreading assets
– Success breads
followers
– Technology
– Authority's supervision
• Disadvantages
– Cost, commissions
– Management might
not respect the
strategy
– Weak performance
– Too aggressive
management
– Liquidation of the fund

12. INVESCO Benelux 12
The classification of funds
• According to the investment policy
• In line with the distribution policy
• In line with customer profiling
• Based on the Net Inventory Value (NIV)
• Major families of funds
– Share funds
– Bond funds
– Mixed funds
– Hedge funds
– Dedicated funds (EIF)
– Funds of funds

13. 13
Three steps in market research
(1)
Customer profiling
(2)
Product profiling
(3)
A perfect match
at the right price
Consumer analysis – Investment products

14. MIFIDMIFID
• Adequacy
Suitability Appropriateness
Services Advise Customer’s
request
Products All products Complex
products
Customers Esp. Retail Retail

15. MIFIDMIFID
• Adequacy
Suitability Appropriateness
Investment
objective
Conform
customers
objectives
Knowledge
Experience
All products All products
Financial
capacity
Professional
and retail
Professional
and retail

16. 16
ABNAMRO

17. 17
(1) Customer profiling
• How much time do you want to spend on your
investments?
• How much have you put aside for unforeseen
events?
• What asset loss would be acceptable?
• Do you have a well defined goal for your
investments?
• What would be your preferred risk/return ratio?
Consumer analysis – Investment products

18. 18
(1) Customer profiling
• What do you intend to do with the capital
appreciation?
• Over how many years do you plan to constitute a
capital appreciation?
• What do you think about investments in risk prone
assets such as shares and funds?
• What return would you find appropriate?
• How would you react if you would loose about
10% of your investment?
Consumer analysis – Investment products

19. 19
(1) Customer profilingConsumer analysis – Investment products

20. 20
Three steps in market research
(1)
Customer profiling
(2)
Product profiling
(3)
A perfect match
at the right price
Consumer analysis – Investment products

21. 21
(2) Product profilingConsumer analysis – Investment products

22. 22
(2) Product profilingConsumer analysis – Investment products

23. 23

24. contact@rogerclaessens.be
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