Types of investment funds
There are two main types of investment funds: mutual funds, and non-redeemable investment funds.
Investors in mutual funds are generally able to purchase or redeem securities of mutual funds on demand for a price representing a proportionate interest of the fund’s net assets. In contrast, non-redeemable investment funds generally offer investors minimal, if any, right to redeem securities, and the price received may not necessarily represent a proportionate interest of the fund’s net assets.
Securities of mutual funds can be listed on an exchange (referred to as exchange-traded mutual funds, or ETFs), or be unlisted and sold directly to investors.
An alternative mutual fund is a type of mutual fund that is permitted under securities legislation to adopt fundamental investment objectives that permit them to engage in certain investment strategies—including short-selling, borrowing, and use of derivatives—that other mutual funds are not permitted to engage in. Alternative mutual funds can be ETFs or unlisted mutual funds.
Mutual funds that are not alternative mutual funds or ETFs are commonly known as conventional mutual funds.
Non-redeemable investment funds
Examples of non-redeemable investment funds include closed-end funds and flow-through limited partnerships. Like mutual funds, non-redeemable investment funds can also be listed on an exchange, or be unlisted and sold directly to investors.
Some types of investment funds are subject to specific regulatory requirements that are different from most mutual funds and non-redeemable investment funds. Examples of these specialized types of funds include scholarship plans and labour sponsored investment funds.