What Are the Three Basic Structures of Mutual Funds?

What Are the Three Basic Structures of Mutual Funds


Mutual funds are investment tools that hold a variety of different securities to disseminate risk and diversify exposure. There are many different types of mutual funds, and an investor can select one depending on their personal preferences and experience. Unit investment trusts, close-ended funds, and open-ended funds are the three fundamental forms of mutual funds.

In this article, we will give a short review of each of these fund structuring solutions.

Three Basic Structures of Mutual Funds

1. Open-ended funds

There is no holding or a lock-in period associated with this type of fund. The holding period refers to the time frame during which monies cannot be reclaimed.

Open-ended funds


Throughout their existence, these funds are always accessible for investments and redemptions at any time. These funds’ daily net asset value calculation is based on the final day value of the invested securities. The net asset value determines how often new shares are issued and old shares are purchased.

Note that these investments are not traded on the stock market. However, there is no holding term. Thus, they give investors more freedom.

2. Close-ended funds

An investment in a closed-end fund is a long-term commitment. Unlike administrators of open-ended funds, who must focus on short-term performance, the holding period enables the management to concentrate on long-term investments.

These funds can only be purchased at the beginning of the offering campaign and can only be paid at the conclusion of the contract. Unlike open-ended ones, these funds’ units are traded on the stock market. Hence, a shareholder can get out of the commitment by selling his shares to other shareholders.

3. Unit investment trusts

A registered investment business that holds a stable portfolio of securities is known as a unit investment trust. The key attribute that differentiates this investment vehicle from open-ended and closed-ended mutual funds is the absence of a director’s board.

Unit investment trusts

Shares, equities, or any other assets can be included in the portfolio owned by unit investment trusts. A unit of the trust is sold to an investor, who is thereafter entitled to all capital and dividend payouts. Unit investment funds have a specified end date by which they are dissolved, and the proceeds are either paid out to shareholders or invested back in new trusts.

If you are in search of trusted partners that can aid you in fund structuring, governance, and asset management, look no further than Thales Capital Luxembourg. You can call them at +35220334030, email structuring@thales.lu, or visit 2 Place de Strasbourg L-2562 in Luxembourg to learn more about fund structuring opportunities.

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