Investment Trusts
Small shareholders who do not have enough money to invest in a wide-range portfolio buy shares in investment trusts.
Investment trust is a public corporate body which invests funds in a wide range of stocks and shares, thus "spreading the risk" more effectively than could be achieved by an individual investor with much smaller funds. The capital of the investment trust is derived mainly from public issues of debentures, preference shares and ordinary shares, which are quoted on the stock exchanges.
Investment trusts can be of two types. Open-end investment fund is an investment fund that is open in the sense that it issues new shares every time that it receives new money from investors – unlike a closed-end investment fund, which issues a limited number of shares that are then traded only in a secondary market. Closed-end investment companies do not stand ready to purchase their own shares whenever one of their owners decides to sell them. Instead their shares are traded either on an organized exchange or in the over-the-counter market.
Most closed-end funds have unlimited lives. Dividends and interest received by a closed-end fund from the securities in its portfolio are paid out to its shareholders.
However, most funds allow the reinvestment of such payments.
Besides, there are so called Real Estate Investment Funds. REIFs have existed for over 30 years. They are essentially (although not legally) closed-end investment companies that invest in real estate instead of financial assets. Similar to true investment companies, as long as 95% of their income is distributed to shareholders, it is free from taxation. Further, at least 75% of their assets and income must be derived from real estate equity or mortgages. REIFs must also have at least 100 shareholders. Their portfolios must be diversified, and no more than 30% of their income may come from selling properties held for less than four years. (This last requirement is designed to prevent REIFs from becoming vehicles for real estate speculation.)
REIFs engage in a common financial intermediation process known as securitization. A REIF manager converts (securitizes) properties into financial assets by purchasing properties for the REIF. In order to finance the purchases the REIF manager issues freely tradable ownership shares.
Words you may need:
derivev получать, извлекать
real estate investment fundучреждение, специализирующееся на инвестициях в недвижимость
securitizationn «секьюритизация»(процесс повышения роли различных видов ценных бумаг как формы заимствований)