Collective Investment Scheme (CIS)

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Here is a list of subtopics about Collective InvestmentInvestment Scheme (CIS):

  • Types of CIS
    • Open-ended fund
    • Closed-ended fund
    • Exchange-traded fund (ETF)
    • Unit trust
    • Investment trust
  • Structure of CIS
    • Trustee
    • Manager
    • Custodian
    • Auditor
  • Regulation of CIS
    • Financial Conduct Authority (FCA)
    • Prudential Regulation Authority (PRA)
  • Investment objectives of CIS
    • Growth
    • Income
    • Balanced
    • Defensive
  • Risks of CIS
    • Market risk
    • Interest rate risk
    • Currency risk
    • Liquidity risk
    • Credit risk
  • Performance of CIS
    • Past performance is not indicative of future results
    • Fees and charges can impact performance
    • Diversification can help to reduce risk
  • TaxationTaxation of CIS
    • Income from CIS is taxed as income
    • Capital gains from CIS are taxed as capital gains
  • How to invest in CIS
    • You can invest in CIS through a stockbroker or financial adviser
    • You can also invest in CIS directly through the fund manager’s website
  • What to look for when investing in CIS
    • The fund’s investment objectives
    • The fund’s risk profile
    • The fund’s fees and charges
    • The fund’s performance
    • The fund’s manager
  • Where to get more information about CIS
    • The FCA website
    • The PRA website
    • The fund manager’s website
    • A financial adviser
      A collective investment scheme (CIS) is a type of investment that pools MoneyMoney from a number of investors and invests it in a variety of assets, such as SharesShares, BondsBonds, and property. CISs are managed by professional fund managers who aim to achieve the investment objectives of the scheme.

There are a number of different types of CISs, including open-ended funds, closed-ended funds, exchange-traded funds (ETFs), unit trusts, and investment trusts. Open-ended funds are the most common type of CIS. They allow investors to buy and sell shares in the fund at any time, and the value of each share is based on the net asset value (NAV) of the fund. Closed-ended funds are similar to open-ended funds, but they have a fixed number of shares. Once all of the shares have been issued, no more can be created. ETFs are similar to open-ended funds, but they are traded on an exchange like shares. Unit trusts and investment trusts are similar to open-ended funds, but they are not traded on an exchange.

CISs are regulated by the Financial Conduct Authority (FCA) in the UK. The FCA sets rules for how CISs are managed and how they must be marketed to investors.

CISs offer a number of advantages over other types of investments. They can provide diversification, which can help to reduce risk. They can also offer access to a wider range of assets than an individual investor could normally afford. Additionally, CISs are managed by professional fund managers who have the expertise to make investment decisions.

However, CISs also have some disadvantages. They can be expensive, as they typically charge fees for management and administration. Additionally, CISs can be illiquid, meaning that it can be difficult to sell your shares if you need to access your money quickly.

If you are considering investing in a CIS, it is important to do your research and understand the risks involved. You should also consider your investment objectives and risk profile to decide whether a CIS is right for you.

Here are some things to look for when investing in a CIS:

  • The fund’s investment objectives: What are the fund’s goals? Are they aligned with your own investment goals?
  • The fund’s risk profile: How risky is the fund? Is it appropriate for your risk tolerance?
  • The fund’s fees and charges: How much will you pay in fees and charges? Will these eat into your returns?
  • The fund’s performance: How has the fund performed in the past? Is it likely to continue to perform well in the future?
  • The fund’s manager: Who is the fund manager? Do they have a good track record?

You can get more information about CISs from the FCA website, the PRA website, the fund manager’s website, or a financial adviser.
Types of CIS

  • Open-ended fund: A fund that issues new shares and redeems existing shares on a continuous basis.
  • Closed-ended fund: A fund that issues a fixed number of shares and does not redeem existing shares.
  • Exchange-traded fund (ETF): A type of open-ended fund that trades on an exchange like a stock.
  • Unit trust: A type of open-ended fund that is managed by a professional fund manager.
  • Investment trust: A type of closed-ended fund that is listed on a stock exchange and is managed by a professional fund manager.

Structure of CIS

  • Trustee: The person or organization that is responsible for protecting the interests of the investors in the fund.
  • Manager: The person or organization that is responsible for investing the money in the fund.
  • Custodian: The person or organization that is responsible for holding the assets in the fund.
  • Auditor: The person or organization that is responsible for reviewing the financial statements of the fund.

Regulation of CIS

  • Financial Conduct Authority (FCA): The UK’s financial regulator that is responsible for regulating CIS.
  • Prudential Regulation Authority (PRA): The UK’s financial regulator that is responsible for regulating banks and other financial institutions that invest in CIS.

Investment objectives of CIS

  • Growth: A fund that aims to achieve capital growth over time.
  • Income: A fund that aims to provide a regular income stream for investors.
  • Balanced: A fund that aims to achieve a balance between capital growth and income.
  • Defensive: A fund that aims to protect investors’ capital in times of market volatility.

Risks of CIS

  • Market risk: The risk that the value of the assets in the fund will go down due to changes in the market.
  • Interest rate risk: The risk that the value of the assets in the fund will go down due to changes in interest rates.
  • Currency risk: The risk that the value of the assets in the fund will go down due to changes in exchange rates.
  • Liquidity risk: The risk that the fund will not be able to sell its assets quickly enough if investors want to sell their shares.
  • Credit risk: The risk that the fund will not be able to repay its debts.

Performance of CIS

  • Past performance is not indicative of future results.
  • Fees and charges can impact performance.
  • Diversification can help to reduce risk.

Taxation of CIS

  • Income from CIS is taxed as income.
  • Capital gains from CIS are taxed as capital gains.

How to invest in CIS

  • You can invest in CIS through a stockbroker or financial adviser.
  • You can also invest in CIS directly through the fund manager’s website.

What to look for when investing in CIS

  • The fund’s investment objectives
  • The fund’s risk profile
  • The fund’s fees and charges
  • The fund’s performance
  • The fund’s manager

Where to get more information about CIS

  • The FCA website
  • The PRA website
  • The fund manager’s website
  • A financial adviser
    Question 1

Which of the following is not a type of CIS?

(a) Open-ended fund
(b) Closed-ended fund
(CC) Exchange-traded fund (ETF)
(d) Unit trust
(e) Investment trust

Answer (c)

Question 2

Which of the following is not a part of the structure of a CIS?

(a) Trustee
(b) Manager
(c) Custodian
(d) Auditor
(e) Regulator

Answer (e)

Question 3

Which of the following is not a regulator of CIS?

(a) Financial Conduct Authority (FCA)
(b) Prudential Regulation Authority (PRA)
(c) HM Revenue & Customs
(d) The Bank of England
(e) The Treasury

Answer (c)

Question 4

Which of the following is not an investment objective of a CIS?

(a) Growth
(b) Income
(c) Balanced
(d) Defensive
(e) Speculation

Answer (e)

Question 5

Which of the following is not a risk of a CIS?

(a) Market risk
(b) Interest rate risk
(c) Currency risk
(d) Liquidity risk
(e) Credit risk

Answer (d)

Question 6

Which of the following is not a factor that can impact the performance of a CIS?

(a) Past performance
(b) Fees and charges
(c) Diversification
(d) Market conditions
(e) The fund manager’s skill

Answer (a)

Question 7

How is income from a CIS taxed?

(a) As income
(b) As capital gains
(c) As dividends
(d) As interest
(e) As a mixture of income and capital gains

Answer (a)

Question 8

How are capital gains from a CIS taxed?

(a) As income
(b) As capital gains
(c) As dividends
(d) As interest
(e) As a mixture of income and capital gains

Answer (b)

Question 9

How can you invest in a CIS?

(a) Through a stockbroker or financial adviser
(b) Directly through the fund manager’s website
(c) Both (a) and (b)
(d) Neither (a) nor (b)

Answer (c)

Question 10

What should you look for when investing in a CIS?

(a) The fund’s investment objectives
(b) The fund’s risk profile
(c) The fund’s fees and charges
(d) The fund’s performance
(e) All of the above

Answer (e)