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What is a UIF?

Kira Dobrovolskaya
Kira Dobrovolskaya
March 21, 2013
What is a UIF?

Today you can hear a large number of abbreviations that are incomprehensible to many people. For example, what is a mutual fund? The abbreviation is deciphered as a mutual investment fund. This is a way of collective investment, when investors are given the opportunity to unite by investing money in favor of a professional management company. As the value of securities that make up a common base increases, so does the value of a share and the balance of each investor’s account in a particular fund increases. The activity of mutual funds is monitored by the law on investment funds. Control over their activities is carried out by the Federal Financial Markets Service of the Russian Federation. The company has the right to manage mutual funds only with a license issued by the Federal Financial Markets Service.

Mutual investment funds have long been known in Russia. They began their existence in 1996. Over 17 years, the number of investors in mutual funds of the Russian Federation reached 1 million 400 thousand people who entrusted mutual funds to more than 400 billion rubles. Let us explain with examples the activity of mutual investment funds.For example, if you invest money in a mutual fund, then you buy shares (shares) of a particular fund accordingly. The fund will combine all the securities that were bought with the common funds of its shareholders, and will spend all cash balances to purchase the securities that make up the foundation of the fund. Buying shares of one fund that copies the RTS index, for a price equal to several shares, the investor receives shares of 50 companies from all 50 mutual funds. Mutual funds differ in the value of securities that were purchased for the fund. The composition of the securities adopted to include:

  • Mutual funds bond;
  • Mutual funds shares;
  • Mixed mutual funds;
  • Funds of funds.
  • Mutual funds are also different by the right of the shareholder to the free choice of time for purchase and sale transactions:
  • Open-ended mutual funds (the transaction can be made on any working day);
  • Interval mutual funds (only on certain days during the year).

A mutual fund combines cash from a large number of shareholders. Consequently, it can be compared with one major investor. The head of the fund can form a large information base and acquire various securities.In this way, the investor will be able to distribute the funds so that the income of all shareholders belonging to the fund will increase dramatically. This means that any amount that will be invested in the mutual fund will be distributed among the securities of the entire portfolio. Each investor will become the owner of part of the investment portfolio. Often this amount is proportional to the number of units that were purchased earlier.

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