Handbook of Investment Administration

Chapter 11

COLLECTIVE INVESTMENT SCHEMES

11.1 INTRODUCTION

Collective investment schemes are investment vehicles which allow investors to pool their assets into a single portfolio in order to gain access to the stock market generally or to specific markets or sectors.

For small investors, they can allow access to professional investment management that would not otherwise be available and enable them to spread the risk of investing in direct equities by having a share of a much larger portfolio than they could invest in on their own. By pooling their funds in this way, they also benefit from the lower dealing costs that a large fund can command.

Collective investment vehicles also have their place in the portfolios of more wealthy investors and in institutional portfolios. Even with a sizeable portfolio it is not always possible or desirable to achieve exposure to a specific market or sector by direct holdings. This can be because the percentage of funds allocated to that market or sector are insufficient to obtain a wide spread of holdings. Equally, it could be that a particular market or sector requires specialist investment experience and so makes a collective investment vehicle the most suitable way of achieving this.

Collective investment schemes are a significant and integral part of the investment landscape and a detailed understanding of their types, administration and dealing is required for almost anyone dealing with investment administration.

11.2 REGULATION OF UK FUNDS ...