There’s no waiting around when it comes to investing with funds. Putting money in and taking it out could hardly be easier, and fund issuers are also obliged by law to redeem units.
Redemption option for investors
Investors in funds essentially have no say when it comes to the funds’ managers making their investment decisions. However, the Federal Act on Collective Investment Schemes (CISA) does provide them with an option for withdrawing from the fund. In the industry, this is referred to as liquidity and people talk of liquid investments. Under the CISA, investors have the right to redeem their units at the net asset value. The modalities for this redemption are set down in the fund’s documents.
Determining the redemption value is essentially simple and transparent. It is based on the intrinsic value, the aforementioned net asset value. Other factors that commonly influence the pricing of financial investments – such as supply and demand – have no influence on the valuation of fund units. The value of a fund unit is based solely on the performance of the investments the fund holds.