Guaranteed funds are a type of fund that guarantees total or partial return of the initial investment on a specific date. This guaranteed maturity date is a future date when all of the fund's shares are guaranteed to reach a specific net asset value. Only those investors who hold their investment until the maturity date benefit from the guarantee.
The expected returns on guaranteed funds may be established from the time of the investment or may depend on the performance of a stock index or a basket of shares.
We can distinguish two types of guaranteed investment funds:
Guaranteed fixed return funds:
funds that guarantee a fixed return in addition to the initial investment.
Guaranteed variable return funds:
funds where the returns are linked to the performance of currencies, equities or other assets. These funds only guarantee the initial investment on the guaranteed maturity date.
Guaranteed funds are recommended when investors are sure they can hold their investment for the guarantee period.
The guaranteed maturity date must be kept in mind, as the situation must be assessed and the appropriate action decided upon at that time. The fund may be merged into another fund when the guarantee matures.
Unit holders have two options when this happens:
They can remain unit holders in the fund
They do not need to do anything in this case, as it is assumed that they wish to continue their investment if they do not order redemption during the window available for this.
Reject the new conditions
The investor exercises their withdrawal right in this case, allowing them to redeem their investment or transfer it to another fund.