Investment funds offer investors effective protection for their money because they are segregated pools of assets which, as a rule, are not affected if the fund management company goes bankrupt.
The CISA and FINMA – embodying investor protection
There can be no absolute guarantees when it comes to financial investments. However, the Federal Act on Collective Investment Schemes (CISA) and the Swiss Financial Market Supervisory Authority FINMA ensure that fund investors are effectively protected from abuses and from improper business practices on the part of fund companies and providers.
Of all the investment products on offer today, funds have on the whole always fared best in the crises to date. Of course, stock market slumps also take their toll on funds and lead to temporary losses. However, thanks to their diversification of risk and their special legal status, funds have suffered significantly lower losses compared with many other products, and especially derivative investment instruments. In particular, there have been no instances of funds experiencing a total loss.
Investment funds – bankruptcy-remote segregated pools of assets
Like stocks and bonds, funds are subject to smaller or larger fluctuations in value depending on their investment focus. However, a fund’s assets do not appear on the balance sheet of the fund management company. In the event of a bankruptcy, the fund’s assets are legally segregated in favor of the investors. Traditional investment funds are not, as a rule, subject to the so-called issuer risk inherent in other forms of investment (e.g. in the case of bonds or structured products).