Block D · Funds & vehicles
‹ Financial markets handbook: overview
Independent working reference. Product and feature names mentioned are trademarks of their respective owners. No investment advice.
Vehicles are the wrapper, not the content; the same asset class can have entirely different cost, tax and liquidity characteristics depending on the shell.
47 · Active mutual funds
Definition: Daily tradable segregated fund assets (UCITS) with active management against a benchmark.
Use: Delegated stock selection; niches where active management can add value.
Opportunities: Outperformance potential; segregated fund assets = insolvency-protected.
Risks: The majority do not beat the benchmark after costs; fees of 1-2% p.a. Style breaks on manager changes.
Typical mistake: Buying funds on 3-year performance; reversion to the mean is the rule.
See also: 48 · ETFs (physical/synthetic) · 111 · Beta & alpha · 114 · Information ratio & tracking error
48 · ETFs (physical/synthetic)
Definition: Exchange-traded index funds; physical (securities held) or synthetic (swap-based).
Use: Cost-efficient core of the allocation; tactical building blocks.
Opportunities: Costs from ~0.05% p.a. Transparency; liquidity.
Risks: Tracking difference; spread in stress phases; counterparty risk with swap ETFs (collateralized); securities lending.
Typical mistake: Comparing only the TER; tracking difference and trading costs are what matter in reality.
See also: 137 · Indices & benchmarks (construction) · 133 · Bid-ask spread
49 · Index funds (non-listed)
Definition: Passive funds without exchange trading; purchase/sale once a day at NAV.
Use: Long-term savings plans, institutional mandates.
Opportunities: No spread; no intraday behavioral risk.
Risks: No intraday reaction possible; smaller selection than ETFs.
Typical mistake: Seeing the missing exchange listing as a drawback; for long-term investors it is often a behavioral advantage.
50 · Money market funds
Definition: Funds in short-dated, high-quality money market instruments; yield close to the policy rate/ESTR.
Use: Cash management beyond deposit insurance limits; diversification of bank risk.
Opportunities: Daily liquidity; interest close to market rates.
Risks: No deposit insurance; minimal price fluctuation; liquidity clauses possible in extreme crises.
Typical mistake: Equating them with overnight deposits; legally a fund unit, not a deposit.
See also: 3 · Money market/liquidity
51 · Mixed funds/multi asset
Definition: Funds across several asset classes with fixed or flexible allocation steering.
Use: One-product solution; delegated asset allocation.
Opportunities: Built-in rebalancing; risk steering.
Risks: Costs on allocation AND selection; comparability difficult; flexible funds often time poorly.
Typical mistake: Comparing mixed funds without looking at the actual allocation; "defensive" is not standardized.
52 · Funds of funds
Definition: A fund that invests in other funds.
Use: Maximum delegation; access to manager selection.
Opportunities: Broad diversification across managers.
Risks: Double layer of costs; loss of transparency.
Typical mistake: Underestimating double costs; 2 x 1.5% eats the premium of almost any strategy.
53 · Target date funds/fixed maturity funds
Definition: Funds with a fixed end date; the allocation turns more defensive towards the target (glidepath), or bonds are held to maturity.
Use: Goal saving (date known); fixed maturity funds as a bond ladder substitute.
Opportunities: Predictability; discipline built in.
Risks: The glidepath does not suit everyone; costs; with fixed maturity funds, reinvestment at the end.
Typical mistake: Treating target date funds of different providers as identical; glidepaths differ strongly.
54 · ELTIF
Definition: EU vehicle for retail access to illiquid investments (PE, infrastructure, private debt); significantly opened up since ELTIF 2.0 (2024).
Use: Adding private markets without institutional minimum sizes.
Opportunities: Regulated access; lower entry hurdles.
Risks: Illiquidity despite redemption windows sometimes offered; costs; young market.
Typical mistake: Confusing redemption windows with daily liquidity; in stress, windows close.
See also: 7 · Private equity · 9 · Infrastructure
55 · Spezialfonds (institutional)
Definition: German AIF variant for (semi-)professional investors, tailor-made investment guidelines, one or few investors.
Use: Standard vehicle for insurers, pension schemes, large family offices; pooling + reporting + master KVG (management company).
Opportunities: Individual guidelines; tax/accounting advantages possible.
Risks: Fixed costs only pay off from double-digit millions.
Typical mistake: Not cross-checking master-KVG reporting with one's own analytics (PORT).
56 · ETCs/ETNs
Definition: Exchange-traded notes on commodities (ETC) or indices (ETN); legally NOT segregated fund assets.
Use: Access to single commodities/crypto where a fund structure is not possible.
Opportunities: Simple exchange access; physically backed gold ETCs are established.
Risks: Issuer/structure risk; roll costs with a futures basis.
Typical mistake: Equating an ETC with an ETF; insolvency protection depends on the collateral construction.
57 · Certificates (structure, issuer risk)
Definition: Structured notes of a bank with a defined payoff profile (discount, bonus, express, capital protection).
Use: Tailor-made profiles (buffer, yield enhancement, partial protection).
Opportunities: Profiles beyond "long only".
Risks: Issuer risk; cost opacity; complexity; secondary market provided by the issuer.
Typical mistake: Seeing the return opportunity but not the embedded option premiums and issuer margin.
See also: 155 · Counterparty risk (counterparty)
58 · Discretionary mandates
Definition: Individual or standardized management of the portfolio by an asset manager according to investment guidelines.
Use: Delegation with direct security ownership (instead of a fund wrapper); reporting and a personal contact included.
Opportunities: Transparency down to single securities; individual restrictions (ESG, exclusions).
Risks: Quality disperses; costs; comparability lower than with funds.
Typical mistake: Judging the mandate's result without a suitable benchmark and without risk adjustment.