How Mutual Funds Differ Around The Globe

Nov 12


Steven Hart

Steven Hart

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Mutual funds are not just for Americans,How Mutual Funds Differ Around The Globe Articles variations of these popular investment vehicles can be found in almost every country with a capitalist economy. The funds are different in virtually every country because laws, regulations, financial markets and customs are different in almost every country.


The country specific and region specific mutual funds and ETFs that are widely sold in the United States are not foreign mutual funds. The same goes for the many products sold as global or international funds. Instead they are American funds; based in the US, registered in the US, regulated in the USA and usually American-owned that invest in foreign securities and equities.


It is legal for US residents to invest in foreign mutual funds as long as the fund is registered with the Securities and Exchange Commission (SEC) and meets that body’s standards. That means you can invest in foreign funds as long as they follow the rules. It should be understand though that foreign funds are not necessarily the same as US mutual funds.


Canadian Mutual Funds

Mutual funds in Canada operate in much the same manner as US funds except that they are regulated by the provinces rather than the federal government. Many of the big US fund companies do operate in Canada and offer products similar to those sold in the US. There probably would not be any real benefit for a US resident to own Canadian mutual funds unless he or she was also a Canadian citizen. Canada also some investment options that are not found in the United States including British style income trusts and labor sponsored funds which are mutual fund type vehicles administered by unions as a retirement investment for their members.


Collective Investment Schemes in the UK

There is nothing called a mutual fund that is traded on British markets instead there are several products called collective schemes that are similar to funds. The closest approximation to an American mutual fund in the UK is an investment trust which is a closed-end fund operated as a publicly traded company. The oldest of these the Foreign & Colonial Trust started in 1868. There are several similar funds in Britain including Unit Trusts, Open-ended Investment Companies (OEICS), and Investment Companies with Variable Capital (ICVC)s that function like mutual funds. Interestingly enough the British have some insured investments similar to annuities that are treated like mutual funds these are Unitized Insurance Funds and With-profits policies. Mutual funds in the UK are regulated by both the Financial Services Authority and Her Majesty’s Revenue and Customs (the Inland Revenue the British equivalent of the IRS).


Collective Investment Schemes in the European Union

Most European countries allow publicly traded investment companies or funds. The rules differ from country to country but any fund registered in any member of the European Union can be traded in any other member of that body. Most European countries allow three kinds of funds: a closed-ended fund or investment company, a fund or investment company with variable capital and a fund or investment company with fixed capital. The funds in the Netherlands and Belgium are the oldest in the world. The funds are regulated by both national governments which coordinate their activities through the Committee of European Securities Regulators.


Mutual Funds in Hong Kong and Elsewhere

Interestingly enough Hong Kong has the most restrictive rules in the world on mutual funds. It even has two regulatory bodies one the Securities and Futures Commission overseas funds that are purely investment vehicles. The other the Mandatory Provident Funds Authority overseas any fund that Hong Kong residents use for retirement savings.


In most other parts of the world, mutual fund operations are close to those in Europe than the United States. Some developing nations have a very limited financial market and a very limited number of funds. For investment there Americans would be better served by US based investment funds.