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What are investment funds?

In Romania there are two major categories of investment funds, open-end and closed-end. The main difference between the two is the fund units issuance and redemption method.


In an open-end investment fund, an investor may subscribe and redeem at all times, as the fund units issuance and redemption processes are continuous. Closed-end investment funds offer a limited number of fund units for a set period of time. These units can be redeemed only at pre-established time intervals or at certain dates, according to the provisions of the setup documents.


An open-end investment fund aims at publicly attracting financial resources from investors (individuals and legal persons), which it invests in various financial instruments: derivative financial instruments, instruments with fixed income, the investor thus having easy access to a diversified assets portfolio.


Open-end investment funds can be classified depending on their investment policy, into various categories according to EFAMA (European Fund and Asset Management Association) standards:

  • Monetary open-end investment fund: Investments in instruments with fixed income;
  • Bonds open-end investment fund: Investments in instruments with fixed income, mostly bonds;
  • Mixed/Diversified open-end investment fund: Investments in instruments with fixed income and equities;
  • Equity open-end investment fund: Investments in equities.

What are your advantages?

Funds offer several important advantages compared to direct investment:


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Significant savings. Open-end investment funds pay much lower trading fees than individual investors. Lower trading fees result in significantly improved investment returns.

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Accessibility. The investor uses only one investment instrument, i.e. the fund unit. The value of a fund unit is given by diversified financial instruments and investments, the investor having access to the capital and financial market, with minimum information analysis efforts; the fund performance is directly proportional with the investment amount and period.

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Diversity. The investment funds assets portfolios include diversified and balanced investments, so as to minimise fluctuations. By holding at least 12 differentequities , the risk of one with unfavourable results affecting the entire portfolio is avoided. In general, open-end investment funds hold more than 20 types ofequities. A diversified portfolio usually obtains good results even if some of the equitieshave poor results, because the other equitiesand categories of assets compensate for the losses generated by those with poor results.

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Professionalism. Open-end investment funds are administered by qualified professionals with extensive experience and knowledge in the field of capital and financial markets. At the same time, the income generated by the administration activities depends directly on fund performance, therefore the administration company will make every effort to manage your investments efficiently.

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Liquidity. Open-end investment funds offer more liquidity than other financial instruments. The amounts can be invested or redeemed at any moment, at the unit value of the net asset valid on that day.


What are the earnings from an investment fund?

After the purchase of the unit funds, their value changes on a daily basis, depending on interest , coupons, dividends cashing in and the quotations of the fund's financial instruments, listed on various financial markets. Therefore, the value of fund units may increase but it may also decrease, depending on the evolution of the portfolio instruments.


The earnings from the investment fund will be represented by the difference between the sale and purchase value of fund units. The return of an investment fund is significantly influenced by the fund risk: the lower the risk, the smaller the return and vice versa, the higher the risk, the more profitable an investment can be.


What investment fund is best suited for you?

You must be well-informed when choosing an investment fund, you can even ask for the support of OTP Bank officers. However, there are a series of factors you must take into account:

  • The money you want to invest;
  • The period you are considering;
  • Risk appetite;
  • Personal financial objectives;
  • Knowledge of financial markets;
  • Available resources (time, access to information, etc.).

Some of the basic principles: return, risk and investment period.

There is a direct proportional link between risk and investment return. Thus, the lower the risk, the smaller the expected return on the investment; the higher the risk, the higher the return on the investment can be.


Some investors are willing to risk higher losses with the hope that they will in the end benefit from favourable circumstances and obtain a very important profit, whereas others are only willing to accept a low risk and settle for modest profits.


In conclusion, one must choose the optimal ratio between return and risk, a ratio which can be adjusted depending on the expectations, financial possibilities and last but not least, each investor’s risk aversion.


Contact one of the OTP Bank representatives and we will help you make the best decision according to your needs and plans. All in complete safety and confidentiality.


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