Management Investment Company
What Is a Management Investment Company?
A management investment company is a type of investment company that oversees publicly issued fund shares.
Management investment companies can oversee both open-end funds and closed-end funds.
Understanding Management Investment Companies
A management investment company oversees capital for clients through pooled funds. U.S. investment market legislation has classified investment companies into three categories under the Investment Company Act of 1940. Section Four of the 1940 Act breaks down the classification of companies as:
- Face-amount certificate company
- Unit investment trust
- Management (investment) company
Section Five of the 1940 Act gives further subtleties on management investment companies. Management investment companies can be either open-end or closed-end companies. Section Five of the 1940 Act additionally further blueprints these companies by diversified and non-diversified companies.
Open-End and Closed-End
Management investment companies issue shares of funds from pooled investment. Investors buy shares of funds that cause sales commission charges as well as operational expenses. Funds management investment companies oversee must conform to U.S. securities regulations. Regulations support fair market activities, investor education, and transparency.
The funds managed by management investment companies trade on exchanges or through open-end management companies and are known as publicly traded investments. Management investment companies offer investors publicly traded pooled fund investments in a broad scope of standard and complex investment strategies.
Inside the management investment company universe, the biggest investment companies in the U.S. incorporate BlackRock, Vanguard, State Street Global Advisors, Fidelity, and Bank of New York Mellon Investment Management.
Open-End Funds
Open-end management investment companies oversee open-end funds. They can be offered as either a mutual fund or exchange-traded fund (ETF). Open-end funds don't have a designated number of shares accessible for trading. The management investment company can issue and recover shares of open-end mutual funds and ETFs at their circumspection.
Open-end mutual funds are known to offer a scope of share classes. Open-end management investment companies structure share classes with various fees that investors must pay while transacting with an intermediary. Open-end mutual funds don't trade on a market exchange; they're transacted through the mutual fund company. Transactions are handled at the fund's next reported net asset value, otherwise called the forward price.
Exchange-traded funds are traded daily on exchanges. Exchange-traded funds can trade at a discount or premium to their NAV. They may likewise trade at par value. Management investment company authorized participants actively monitor ETF prices and exchange trading with the ability to make and reclaim shares at their circumspection to deal with the price of an ETF.
Closed-End Funds
Closed-end management investment companies oversee closed-end funds. They offer a specific number of shares to the market in an initial public offering. Closed-end management investment companies don't make or reclaim shares following the public offering. Closed-end funds trade daily on exchanges. They are known to trade at a discount or premium to their NAV.
Diversified and Non-Diversified
As well as examining open-end and closed-end management investment companies, Section Five of the 1940 Act likewise makes sense of diversified and non-diversified management investment companies. Diversified management investment companies have assets that fall inside the 75-5-10 rule.
A 75-5-10 diversified management investment company will have 75% of its assets in different issuers and cash, something like 5% of assets in any one company, and something like 10% ownership of any company's outstanding voting stock. Any management investment company not falling inside the 75-5-10 rule is viewed as a non-diversified management investment company.
Features
- Management investment companies can oversee both open-end funds and closed-end funds.
- A management investment company is a type of investment company that oversees publicly issued fund shares.
- Open-end funds don't have a designated number of shares accessible for trading; closed-end funds offer a specific number of shares to the market.
