How do funds work?

Funds can be open-ended or closed-ended.

Open-ended funds operate on a simple principle:
They pool money from many investors and allocate it in various assets such as shares, bonds or property according to the fund’s strategy.

In so-called “actively” managed funds, this is handled by a fund manager. In the case of index funds (ETFs), however, there is no fund manager. A distinction is made here between “passive” ETFs, which track an index, and “active” ETFs, which, for example, invest according to fixed rules, aim to outperform the market, or selectively choose individual shares.”

Closed-end funds work by different rules:
As a rule, they invest in tangible assets such as real estate and aircraft, or in company investments.

The fund company issues fund units only for a limited time and often only for a limited total amount. Once all the shares have been sold, it then invests the money collected in accordance with the fund's investment guidelines.

In principle, the capital of the investors remains in the fund until the agreed term ends - hence the name 'closed' fund. The fund is then wound up, its investments sold and the investor receives the current value of his unit. Before winding up the fund, it may sell its units on the stock exchange (secondary market).