A Fund is a structure to pool funds from various individuals or corporations (Fund Member) and use the accumulated pool of funds to invest in various activities or other financial instruments. Each Fund will have its own objective and investment strategy which will be set and executed by the manager of the Fund (Fund Manager)
The Fund Manager has the discretion to manage the Fund according to its own objectives on a day-to-day basis. The Fund Manager is not the beneficial owner of the Fund, the beneficial owners of the Fund are Fund Members, therefore the assets of the Fund and its proceeds belong to the Fund Members. The Fund Manager charges a service fee for management of the fund. The Fund Manager’s service fee varies depending on the fund type.
In Maldives, Funds are registered with the Capital Market Development Authority (CMDA). Funds can be incorporated in the form of a company (public or private) and also in the form of a limited liability partnership. These legal forms are defined in the respective regulations. The Funds are registered under Regulations on Registration and Management of Investment Funds 2015/R-57.
Bank deposits are sold by banking institutions which are licensed and regulated under the Banking Act of Maldives Maldives Banking Act 3/2015. Similarly, Funds are also licensed and regulated by the Maldives Securities Act 2/2006.
The Banking Act comes under the Maldives Monetary Authority (MMA) and the Securities Act comes under the purview of CMDA. Both MMA and CMDA issues various regulations to protect the depositors as well as investors in Funds. Banks are supervised by MMA and similarly Funds and Fund Managers are supervised by CMDA.
As described in Question 2, Funds can be either structured in the form of a company or a limited liability partnership. In either form, the Fund Manager assumes the responsibility of managing the Fund according to the objectives of the Fund. The Fund Manager is licensed by CMDA.
The respective rights of Fund Members and respective rights and obligations of the Fund Manager are described in the Fund incorporation documents such as Articles of Association (AOA), Memorandum of Association (MOA) and Partnership Agreement.
The Fund maintains an individual account for each Fund Member. The Fund’s investments and its performance is shown in the individual Fund Member account on a daily basis. The Fund Manager tracks the performance of the investments and publishes the Net Asset Value (NAV) of the Fund.
The Net Asset Value (NAV) of the Fund is calculated by aggregating the total value of investments of the Fund after deducting any dues of the Fund. The NAV is used as a basis for determining number of units received from the Fund when joining the Fund and also to determine the cash-out when exiting the Fund. The NAV is used to determine the price of the Fund at a given point in time.
The price of the Fund is simply the NAV divided by number of units within the Fund.
A unit shows a Fund Member’s share (or participation) in a particular fund. Units are issued when joining a fund, and redeemed when exiting a fund. Individual units allocated to a Fund Member depends on the amount of money invested and the price of the fund at a given point in time.
Please read the fund documents to understand specific details of a fund, such as, the investment objectives, risk-return profile, and charges to determine if a particular fund is suitable for you before investing.