How to choose an investment fund

Most of the investment funds you can invest in through ABN AMRO are non-complex investment funds. These funds are covered by the European regulations on UCITS (Undertakings for Collective Investment in Transferable Securities). They must comply with specific rules designed to protect you as an investor, and are monitored by local regulators. A UCITS is a type of investment fund that allows you to join or leave at any time (open-end).

Complex investment funds fall into a less common category. In the financial world, these funds are also known as AIFs (Alternative Investment Funds). They are not covered by the UCITS regulations and have more freedom in their choice of investments. As well as investing in shares and bonds, they can also invest in raw materials, impact investments such as micro-finance, direct real estate and private equity.

Read more about complex investment funds >

The difference between open-end and closed-end investment funds relates to the way that these funds issue new fund units (shares in the fund). This difference affects the way that the price of the fund is set and how easily people can join, participate in or leave the fund.

• The manager of an open-end investment fund can issue new fund units (shares in the fund) and redeem existing units at any time. In other words, you can buy and sell whenever you want. 
• With a closed-end investment fund, the investment fund can only issue a limited, pre-set number of fund units. You can only buy fund units from someone who is selling theirs. 

The majority of funds that you can invest in through ABN AMRO are active investment funds. The fund manager of an active investment fund selects the investments according to a certain strategy, and tries to generate a higher return than that of the comparable index (the benchmark).

A passive investment fund, also known as an index fund or tracker fund, is a fund that tries to track the performance of a specific stock market index, such as the AEX or Dow Jones. Most ETFs (Exchange Traded Funds) are passive investment funds. The fund managers track the benchmark, trying to achieve roughly the same return as that of the index.