Mutual Funds

Mutual funds are a form of collective investment where sufficient number of investors pool their financial assets in order to invest in securities and other financial instruments. In Bulgaria they are legally defined such as:

• Open-end investment companies, and
• Mutual funds.

By buying shares of an investment company, units of a mutual fund, respectively, the individual investor receives a share from pooled investment portfolio comprising of the assets of all shareholders/units’ owners. Each mutual fund follows a particular investment strategy in order to achieve certain objectives in line with the risk level and target return preliminary defined in its Prospectus and Rules. The asset management company of the mutual fund invests the raised capital and the investment profit or loss is calculated in the redemption price of the fund’s shares/units such being distributed to all investors proportionally.

Mutual Funds Advantages:

Professional Portfolio Management – a team of asset managers and analysts takes care for optimal value increase of the assets through active management and taking preliminary defined for the fund levels of risk;

Investments Diversification – the collective form of investing through raising critical amount of funds for management allows acquiring many diverse in type financial instruments, thus minimizing the systematic risk of the entire portfolio;

High Liquidity – high liquidity of the investment due to the obligation of mutual funds to redeem their shares on investors’ request;

Low Transaction Costs – economies of scale through reduction of transaction costs due to the higher value of deals compared to individual portfolio (the common case);

Supervision and Transparency – activity of both asset management companies and mutual funds is monitored by independent custodian bank on a daily basis and controlled by the Financial Supervision Commission;

Tax Preferences – there is a double tax effect: on one hand income realized from trading of shares/unit of mutual funds on a regulated market, including redemption at a desk, is tax exempt, and on the other hand, investment return achieved by mutual fund is not subject of taxation.

Notice to the Investors

The investors in units of mutual funds should consider the fact that: (1) The price of and the return from shares may be reduced – the profit is not guaranteed and the investors take the risk not to recover the full amount of their investments; (2) The investments in a mutual fund are not guaranteed by a guarantee fund, established by the state or by other kind of a guarantee; (3) The previous results from the activity are not connected to the future results of the mutual fund. The prospectus and establishment documentation of the funds are available for the public at Astra Asset Management`s office, as well as on the website of the Company.