Dedicated investment funds: a customised wealth management solution
Dedicated investment funds or CIUs (collective investment undertakings) combine flexibility, simplicity and freedom. They are ideal for investors seeking personalised management and information about their investments. They maintain consistency and unity for a family’s investments within the same portfolio.
As a reminder
In France, CIUs take the legal form of a SICAV (variable capital investment fund) or an FCP (investment fund). The AMF (French Financial Markets Authority) approves all CIUs in France, verifying that they meet the conditions required by regulations and that a prospectus has been published before they are licenced for sale. The net asset value of each CIU is calculated according to the frequency set out in the prospectus (e.g. daily, weekly, etc.). This net asset value is calculated by the valuation agent and approved by the asset management company.
Dedicated investment funds are reserved for between 2 and 20 investors or for a category of investors (associations, foundations, etc.). All the investors benefit from the same investment management approach, which they define themselves, without their assets being spread between several financial institutions.
From the preparation of investors’ specifications to the approval by the regulatory authority, the creation of a French dedicated investment fund takes at least 5-6 weeks.
Types of dedicated investment funds
Dedicated investment funds can take several forms:
- FCP under French law
This is the most common type of fund. FCPs have fewer administrative requirements but there is a restriction on investment holdings: a maximum of 10% of assets can be held directly by an individual (excluding life insurance).
- French SICAV
This format is suitable for families seeking to hold the investment fund directly and/or for whom the legal form (legal entity) and its implications (governance, management with board of directors and annual general meeting) are important. The administrative management of a SICAV is more complex and more expensive.
- Sub-fund in a Luxembourg SICAV
This is the most appropriate format for an individual or family planning to move abroad. It can be eligible for a wider range of financial instruments approved by the Luxembourg regulator, the CSSF. However, the administrative management is more complex than for French FCPs, and the administrative fees are higher.
Advantages of dedicated funds
A dedicated fund is tailor-made for its investors (name, ISIN, investment theme, financial management style, fees, reporting, etc.). It can incorporate specific investment constraints as well as the investors’ performance objectives and preferred investment horizon.
Dedicated funds may be eligible for life insurance policies (subject to acceptance by the insurer). They provide access to a wide range of investment solutions including financial instruments such as derivatives, gold, etc.
The use of derivatives (options and futures) makes it easier to hedge the portfolio and allow for more flexible management.
Dedicated funds are verified by an external custodian independent of the asset management company, which ensures that regulatory and contractual ratios are met at all times.
Account monitoring is also easier because the dedicated fund will be shown as a single line in the investor’s account.