Definition of investment funds and how they work

An investment fund is a financial instrument that pools the resources of both small and large investors and manages them as a single pot of assets.

An investment management company is given responsibility for managing this “piggy bank”, thereby enabling large as well as small investors to benefit from professional and diversified management of their investments.

The key issue is to define the investment objective on the basis of offers/proposals, which are generally subdivided into classes. The most common types of assets are cash, bonds, equities, real estate and commodities.

As soon as an investor pays money into a fund, he/she automatically also becomes a shareholder with the right to vote (if registered in its own name in the register of shareholders and not through a financial intermediary - see Prospectus) and receive any income generated by the investment.
 

SHARE VALUE (NAV)
The price of a share – defined as the NAV (Net Asset Value) – is calculated each business day on the basis of the closing prices from the previous day by dividing the fund's assets, after deducting liabilities and costs, by the total number of shares outstanding.

TRADING
Fund shares can be subscribed to, redeemed or converted each day, according to the procedures described in the Prospectus. 

Risk profile

Two rules serve as a guide for any investment:

1. The greater the returns, the higher the risks will be.
2. In general, the higher the risks, the longer the timeframe necessary to achieve the anticipated return will be.

The risk profile is established with reference to appetite for risk based on income and assets, which determines the investor's willingness to take on more or less risk in order to generate the anticipated return.
 

Establishment of an investment portfolio consistent with the investor's risk profile:

Bond

• Investment objective: maintain the value of the portfolio over the long term
• Composition of return: current income from interest
• Expected portfolio volatility: low.

Conservative

• Investment objective: maintain the value of the portfolio over the long term
• Composition of return: current income from interest and dividends and, to a lesser extent, from capital gains
• Expected portfolio volatility: medium/high.

Balanced

• Investment objective: achieve an increase in the value of the portfolio over the long term
• Composition of return: current income from interest and dividends as well as capital gains
• Expected portfolio volatility: medium/high.

Growth

• Investment objective: achieve a substantial increase in the value of the portfolio over the long term
• Composition of return: capital gains and, to a lesser extent, current income from interest and dividends
• Expected portfolio volatility: high.

Equity

• Objective: achieve a very substantial increase in the value of the portfolio over the long term
• Composition of return: predominantly from capital gains and, to a lesser extent, from current income from dividends
• Expected portfolio volatility: very high.

Types of risk

When investing money, investors are inevitably exposed to risks; it is therefore important to understand the associated risks and mitigate them as far as possible.

With an active investment fund, risk management is delegated to a team of specialists, which analyses and monitors risks throughout all phases of the investment process.

Thanks to prudent management of the fund by investment professionals, the risk-reward ratio will always be consistent with the strategy pursued.

The main investment risks are described below.

How to handle emotion

Every decision we take incorporates both rational and emotional elements; sometimes the former prevail, while on other occasions emotions take the upper hand and make us act on impulse.
When we invest our savings, market volatility can influence our state of mind, which is why it is important not to let ourselves get carried away by emotions (whether positive or negative) and to remain focused on the investment objective. It is therefore important not to overlook any risks when investments are performing well, and not to focus on any temporary losses if the markets fall or investments are down. In fact, it is especially important not to lose one's nerve at these times because, historically speaking, the best investment opportunities arise after a market contraction.

How to avoid these extremes?

• Set long-term objectives, the timeframe over which you intend to achieve them and your tolerance for risk. By doing these three things, you can determine the investment strategy that is best suited to you, which will act as a guide within any market context.
   
• Diversify risks: spreading your investments over multiple stocks will help to reduce risks as any negative performance of one security may be offset by the positive performance of another. Investment funds are an excellent means to achieve diversification as they contain dozens (in some cases hundreds) of securities. 
   
• Do not “follow” the market: each transaction that you carry out must not be based on short-term market performance, but rather on long-term objectives.
   
• Obtain information: before making any decisions, it is important to understand what you are investing in and what the related risks are. In the case of investment funds, investors should read and understand the KIID (Key Investor Information Document) before subscribing. 
   
• Consult investment professionals: obtaining advice from experts helps increase awareness of the relevant area and avoid unpleasant surprises.

The importance of diversification

Spreading your investments over multiple securities will help to reduce risks, as any negative performance of one security may be offset by the positive performance of another. However, the opportunity to increase the number of securities within the portfolio is not sufficient, as it is also necessary to pick them carefully in order to ensure that there is a low correlation between them, i.e. that they react differently to changes in market conditions. 

Investment funds are therefore an excellent way of achieving diversification, as they provide access to dozens (in some cases hundreds) of securities, thereby enabling market risks to be lowered significantly, even for small investors.   

Fixed Income funds

• Focus: bond funds invest predominantly in bonds (debt securities), which may be issued by companies, governments, supranational bodies, local authorities, government agencies, etc.
   
• Investment objective: maintain the value of the portfolio over the long term. The return mainly consists of current income from interest. 
   
• Expected portfolio volatility: low.
   
• Experience: BPS (SUISSE), the investment manager, has more than 25 years’ experience in this asset class.
   
• Range:

Convertible bond funds

• Focus: convertible bonds are corporate bonds that incorporate an option enabling the investment manager to convert them into shares at a pre-determined price. Although there is an option to convert, it is not exercised. Funds that invest in convertible bonds enable the unique characteristics offered by this important asset class to be exploited.
   
• Investment objective: maintain the value of the portfolio over the long term. The return mainly consists of current income from interest and, to a lesser extent, capital gains. 
   
• Expected portfolio volatility: medium.
   
• Experience: Union Bancaire Privée (Europe) – UBP, the investment manager, has more than 20 years’ experience in this asset class.
   
• Range: 

Strategic funds

• Focus: depending on the investment strategy or objective chosen, these funds invest variable percentages in different instruments, such as bonds, equities, currencies, etc. They are also known as mixed funds.
   
• Investment objective: increase the value of the portfolio over the long term. The return consists of current income from interest, dividends and capital gains. 
   
• Expected portfolio volatility: medium to medium-high.
   
• Experience: BPS (SUISSE), the investment manager, has more than 25 years’ experience in this asset class.
   
• Range: 

Equity funds

• Focus: equity funds invest predominantly in equities, i.e. shares in companies. Depending upon the strategy chosen, the investment can have a national or international focus.
   
• Investment objective: achieve a substantial increase in the value of the portfolio over the long term. The return predominantly consists of capital gains and, to a lesser extent, current income from dividends. 
   
• Expected portfolio volatility: very high.
   
• Experience: BPS (SUISSE), the investment manager, has more than 25 years’ experience in this asset class.
   
• Range: 

SFDR Classification

Responsible or sustainable investment is an approach to investing that aims to incorporate ESG (environmental, social and governance) factors into investment decisions, with the aim of better managing risk and generating sustainable, long-term returns (source: PRI 2019).
Since it is an approach that supports the manager when selecting securities, it can be applied to both equities and bonds.

At present, the following funds incorporate a sustainability analysis (ESG) into the investment process: 
 

Other funds

In addition to those mentioned, there are also other categories of investment fund, the most common of which are: money market funds, real estate funds, commodity funds, hedge funds, private equity funds, etc.

Popso (Suisse) Investment Fund SICAV does not at present have any funds falling under the categories mentioned above.

Definition

"Sustainable investment is an approach to investing that aims to incorporate ESG factors into investment decisions, with the aim of better managing risk and generating sustainable, long-term returns." (Source: UN PRI 2019)

Approaches to sustainable investment:

• TRADITIONAL INVESTMENT: traditional investments do not factor environmental, social and governance (ESG) considerations into investment decisions. The sole aim is to generate returns.
   
• EXCLUSIONS: exclusions avoid investments being made in companies with a low level of transparency or whose operations are not consistent with the values of the company responsible for selecting investments.
   
• INCORPORATION OF ESG CRITERIA: by incorporating sustainability criteria (ESG) into the investment process, the objective is to gain a better understanding of risk so as to improve risk management, and consequently to generate returns that are sustainable over the long term. In addition, if a best-in-class strategy is adopted, only the companies capable of achieving the best ESG scores within their sector are selected. The strategy can be applied across all sectors, including the most controversial.
   
• THEMATIC AND IMPACT FUNDS: thematic funds represent investments involving a particular issue or megatrend, such as for example water, digital security or electric vehicles. On the other hand, the objective of impact investing is to invest in companies whose operations have a positive impact on the environment or on society, for example by reducing hunger. The objectives pursued are typically those set out by the United Nations Sustainable Development Goals (SDG). Accordingly, the investor's focus is first and foremost on benefiting the environment or society, and then on financial performance.
   
• PHILANTHROPY: philanthropy has nothing to do with financial performance; its sole aim is to contribute to the well-being of others through charitable works. A famous example of this is the Bill & Melinda Gates Foundation, which is considered to be the world's largest private, philanthropic organisation.

United Nations Sustainable Development Goals (UN SGDs)

On 25 September 2015, 193 UN member countries approved the 2030 Agenda for Sustainable Development. It has been applicable since 2016, and with its 17 Sustainable Development Goals (SDGs), the Agenda sets out the new global, universal reference framework for sustainable development. UN member countries have pledged to work together to achieve these targets by 2030. The key elements are grouped under the five fundamental principles People, Planet, Prosperity, Peace and Partnerships (known as the 5 Ps.). https://sdgs.un.org/goals

Why incorporate sustainability considerations into the investment process?

There are a number of reasons why finance professionals carry out sustainability assessments as part of the investment process:

• Investors are showing increasing interest in climate change and sustainable finance, with some groups, such as millennials, being more sensitive to these issues than earlier generations.
   
• Strong pressure from institutional investors, such as pension funds, which have long-term investment horizons and are subject to more stringent regulatory requirements in terms of how they invest assets.
   
• Governments and authorities from around the world have created or adopted road maps for creating regulations aimed at promoting sustainable finance.
   
• Sustainable investment is not a form of charity: numerous studies have shown how incorporating sustainability criteria improves risk assessment and can lead to better long-term performance than with traditional strategies.

Sustainable investment policy of BPS (SUISSE)

For further information on the sustainable investment policy of the fund's investment manager, BPS (SUISSE), please consult the following link: Sustainable Investment Policy - BPS (SUISSE) (bps-suisse.ch).

Where can I subscribe a Popso (Suisse) fund?

Distributor for Switzerland:
Banca Popolare di Sondrio (SUISSE) SA
Via Giacomo Luvini 2a
CH-6901 Lugano

Distributor for Italy:
Banca Popolare di Sondrio S.p.A.
Piazza Garibaldi 16
I-23100 Sondrio

What are the minimum subscription amounts?

The minimum subscription amount is 50 CHF / EUR / USD for classes intended for private clients and 5'000 CHF / EUR / USD for classes intended for institutional clients.

What is the difference between a KIID and a factsheet?

The KIID (Key Investor Information Document) is a legal information document, standardised at European level, which provides a summary of key information on the fund and enables clients to make an informed decision before subscribing. To this end, the KIID has five sections: 

-    Objective and investment policy
-    Risk and reward profile
-    Charges
-    Past performance
-    Practical information.

The factsheet, or monthly report is a marketing document, which typically contains information on the fund's composition and performance.

How is the fund price (NAV) established?

The price of a share – defined as the NAV (Net Asset Value) – is calculated each business day on the basis of the closing prices from the previous day by dividing the fund's assets, after deducting liabilities and costs, by the total number of shares outstanding.

What is the difference between the management fees and ongoing charges?

The ongoing charges are the costs charged, as a percentage, for holding the fund, and include the management, administration and auditing fees, custody fees and a service charge. However, they do not include the entry and exit fees, performance fee or the fund's trading costs, owing to their occasional and non-recurring nature.

The management fee, one of the items comprising the ongoing charges, represents the remuneration due to the investment manager for managing the portfolio.

If I sell my shares in the fund, how long does it take for the money to reach my account?

All shareholders have the right to redeem their shares in the SICAV at any time and without restriction. The regulations state that share redemption payments will be made within seven business days of the applicable valuation date. Payment is usually made three days after the execution order, if received by the cut-off time.

Please consult the sales prospectus for further information.