ICVC Explained: Understanding Investment Companies with Variable Capital

An ICVC, or investment company with variable capital, is a type of collective investment instrument that is available in the United Kingdom. This type of investment is similar to an umbrella mutual fund and it is designed with the sole purpose of bringing in returns for the investors in the fund. This type of investment tool can invaluable and can provide the investor with flexibility. This type of company is set up as an open-ended corporation. Investors can pool their money together, under the direction of the ICVC company.

Investment Company with Variable Capital

The ICVC company will then take these funds and use them to invest in different types of securities. A manager is in charge of making the investment decisions for the group. This type of fund will use the money to purchase stock, bonds, and shares in other mutual funds in order to obtain gains for the group. They have the flexibility to invest in a number of different investment vehicles as well. When investors want to get into the group, the company has to create new shares for them. If someone wants to get out, they will redeem the shares for them and cash them out. 

Umbrella Fund Structure

Many of these investment companies will set up their business structure as if it were an umbrella fund. Investors put their money into a master fund. Then, they allocate their money to a number of different sub-funds. These smaller funds utilize many different investment strategies which provides the investor with some flexibility. Regardless of whether they want an investment with a little more risk or if they prefer a conservative strategy, they should be able to find what they need. 

Net Asset Value

Since the investment company is open ended, when an investor wants to purchase shares, they are based on the net asset value of all of the assets. By doing this, these shares are not traded with other investors. They are simply purchased or redeemed from the actual investment company itself. With this type of share, the investors are entitled to a share of all of the assets that are included in the investment company. The share prices will fluctuate in value, based on the fluctuations in the underlying assets that make up the fund. 

Advantages

Putting your money into an investment company with variable capital can provide you with some advantages. One of the primary advantages is that you can diversify your investments. This type of investment company will purchase many different securities which will help diversify the investments as a whole. Another advantage of this type of investment is that it has professional money management. Individuals with a great deal of experience in the financial markets have the final say as to what investments will be chosen for the group.