- What is an investment fund?

- An investment fund is a pool of money contributed by a small or large number of subscribers, unit-holders or shareholders, which is invested and administered on their behalf. They share the proceeds (or losses) in proportion to their subscriptions after deduction of costs.

- Who runs an investment fund?

- Three distinct functions exist: the promoter is the person or company who established the fund and markets it; the manager is the person or company who runs it from day to day, and the custodian is the person or company who holds the investment assets on behalf of the subscribers. In some jurisdictions, these functions have to be exercised by separate bodies, but in many, two or more can be combined. All three functions are rewarded with fees, usually based on the value of the fund, but sometimes being success-based.

- What is a mutual fund?

- A mutual fund is an investment fund divided into units (equivalent to shares) which can be bought from and sold back to the manager of the fund, but which are not traded as such. The value of the fund NAV (net asset value) per unit is calculated frequently. Many countries have favourable tax regimes for mutual funds, to encourage saving.

- What is UCITS?

- This is an EU Directive which establishes a common regulatory regime for Undertakings for Collective Investment in Transferable Securities, ie funds under UCITS can market themselves throughout the EU. As the name implies, investments are limited to those securities listed on public stock exchanges. Many mutual funds in Europe use the UCITS legislation.

- What is an open-ended investment fund?

- One which has no pre-determined closing date. Most publicly-marketed investment and mutual funds are open-ended.

- What is an closed-end investment fund?

- One with a pre-determined closing date, on which the fund's assets must be realised and the proceeds distributed back to the subscribers. Closed-end funds are normally used by groups of private investors, often working in 'limited partnerships' for tax reasons.

- What is an offshore investment fund?

- One which is based in an offshore jurisdiction (although the term is often used, perhaps incorrectly, to describe a fund which is based outside a particular high-tax country). An offshore investment fund may have the problem that it cannot market into some important high-tax countries unless its local supervisory and regulatory regime is 'recognised' by high-tax countries as being up to their standards. Broadly speaking, this means that if you see an offshore fund being marketed in a high-tax country, its investment behaviour is probably quite constrained, and this may limit its ability to achieve high returns, in the interests of protecting investors.

- What types of offshore fund are there?

- Offshore funds come in many varieties, even more than onshore funds (those in high-tax countries) which are often limited by local regulation to less volatile types of investment. Thus, there are offshore bond funds, equity funds, sectoral funds, emerging-market funds, money-market funds, hedge funds, property funds, income funds, capital funds - and more.