Investment funds

What the EU is doing and why

Investment funds are investment products created with the sole purpose of gathering investors' capital, and investing that capital collectively through a portfolio of financial instruments such as stocks, bonds and other securities.

Investment funds play a crucial role in facilitating the accumulation of personal savings, whether for major investments or for retirement. They are also important because they make institutional and personal savings available as loans to companies and projects which contribute to growth and jobs.

As part of the capital markets union (CMU), the EU introduced a series of measures to diversify the funding of EU businesses, strengthening cross border capital flows and provide investors with better investment opportunities.

Collective investment funds

As part of its effort to create a barrier-free market for collective investment funds, the EU has legislation in the following areas

• undertakings for the collective investment in transferable securities, i.e. collective investment funds easily accessible by retail investors
• alternative investment fund managers, i.e. managers of investment schemes designed primarily for professional investors
• european venture capital funds, a subcategory of alternative investment schemes that focus on start-ups and early stage companies
• european social entrepreneurship funds, alternative investment schemes that focus on social enterprises
• european long-term investment funds, i.e. funds that invest on a long-term basis in infrastructure projects, real estate, and small and medium-sized enterprises
• money market funds, i.e. investment funds that invest in short-term debt instruments such as securities issued by banks, businesses or governments

Retail investment products

Investment products are complex and it can be difficult to compare them or fully grasp the risks they involve. To protect investors, the EU has adopted a regulation introducing a key information document (KID), a simple document giving investors key facts in a clear and understandable manner.

A KID is required for products including 

• all types of investment funds
• insurance-based investments
• retail structured products
• private pensions

Measures on cross-border distribution of funds

The EU adopted measures to facilitate cross-border distribution of funds, improve transparency, and create a single access to information on national rules related to marketing requirements [and regulatory fees and charges levied] by national competent authorities. This initiative aims to eliminate regulatory barriers to the cross-border distribution of investment funds and enable a better functioning single market and economies of scale.

Relevant legislation