There are four mutual funds in Mena: Balanced Funds, Fixed Income Funds, Global Mutual Funds, and Islamic Mutual Funds.
In addition to those four types above, other types exist throughout MENA, such as money market and equity funds. Mutual funds are one of the most liquid investments available to investors, and therefore if an investor wishes to withdraw his capital, it is nearly always possible.
Balanced Funds (BF)
Balanced Funds (BF) invest in equities and fixed income instruments listed on the DFM. There isn’t much difference between this and other types of mutual funds except that some balanced funds may be restricted from investing more than 5% of their assets in shares while others would be locked up for one year after purchase.
Some investors consider hybrid investment vehicles such as Balanced Funds better than equity-only funds due to the minimal risk of any one asset class.
Fixed Income Funds (FF)
Fixed Income Funds (FF)invest in a range of fixed income products from government securities to commercial paper and debentures.
Although this type of fund is considered low risk, changes in market sentiment or any unexpected events may cause the value of its assets to fall. For an investor to realise returns on capital, these funds must have a secondary market.
Global Mutual Funds (GMF)
Global Mutual Funds (GMF) are mutual funds that invest in foreign securities. They are regulated by the CMA but have no specific listing requirements. Investors may purchase with dinar, dirham or riyal.
The main disadvantage is that the CMA does not govern them; therefore, it is more difficult for investors to obtain information on investment performance and necessary details about these types of funds.
These investments can be problematic since there is always fluctuation between market values in different geographical locations.
Islamic Mutual Funds (IMFs)
Islamic Mutual Funds (IMFs) are divided into Shari’ah-compliant equity funds, restricting themselves from investing in restricted assets such as alcohol, pornography, financial services, tobacco, and weapons.
These funds can invest up to 49% of allocated capital in non-restricted assets though most income is generated from their equity portfolio. Other types, such as Shari’ah-compliant debt mutual funds, only invest in fixed income securities without a secondary market. Here are some other Mutual funds as well.
Money Market Funds (MMF)
Money Market Funds (MMF) invest in short-term safe financial products like bank bills, commercial papers and repurchase agreements.
The aim is to have a stable net asset value per share at all times. Money market funds are therefore restricted from investing more than 5% of their assets in securities lending/borrowing or converting securities into cash, resulting in fluctuations of share prices.
This type of investment vehicle is mainly used by investors seeking security and liquidity instead of returns on capital investment.
Equity Funds (EF)
Equity Funds are funds that invest in inequities. It’s where investment capital is used to purchase shares of companies. Usually, you would be restricted with this type of fund to only invest in publicly held companies registered with the Capital Market Authority (CMA).
The aim of equity funds is always to realise capital gains taxed at a rate of 20% unless the gains are reinvested within six months on which they are exempted. Investors need to know about their funds annual operating expenses since these fees will erode returns over time from an investor’s perspective.
Unlike Equity Funds, Fixed Income Funds invest in debt securities, usually with maturities of 1 – 3 years and therefore have low credit risk compared to equities. This kind of investment is perfect for investors seeking stability and low volatility.
However, many fixed-income funds in Mena do not receive as much attention from retail investors as equity funds due to these investments’ nature. There are more mutual funds in MENA. For more information, visit our site Saxo Dubai market. Happy trading and investing.