Meginmál

Funds

It is important to keep a reserve fund to meet unexpected expenses. The safest way to save is to deposit funds in bank accounts, but they generally yield lower returns than other saving options such as UCITS or securities. Securities trading can entail risks that are important to be aware of. Banks, investment firms and fund operators, who provide investment advice and perform asset management, have an obligation to evaluate investors, e.g. examine the client’s financial situation, knowledge and experience of securities trading before the service is provided.

UCITS

  • UCITS funds receive capital from the public for collective investments.
  • UCITS funds invest in financial instruments, e.g. shares and bonds and other liquid assets.
  • UCITS funds must invest in accordance with the approved investment policy and the fund's investment mandate.
  • A unit certificate is a certificate that proves the person's ownership in the relevant fund. 
  • The main types of UCITS funds are bond funds, equity funds and mixed funds.
  • It is important to familiarise yourself with the key information document of the UCITS fund, which provides, among other things, information on investment limits, the asset portfolio, risk indicators and risk factors, recommended investment periods and costs incurred by the customer as a result of trading in unit shares of UCITS.
  • It is useful to familiarise yourself with the fund's prospectus, which provides detailed information about the fund and its operators. There you will also find the rules of the fund.
  • A fund’s risk indicator is ranked on a scale of 1 to 7 and indicates how much the price/rate of the fund’s units fluctuates over a certain period of time. The higher the number on the scale is, the greater the volatility of the fund’s rate and the riskier it is therefore considered to be.
  • Each investor must assess risk appetite and risk tolerance, i.e. how important it is to protect the principal of the investment and how long the funds can be tied up to increase risk tolerance.
  • Costs, commissions and fees vary from fund to fund and it is very important to familiarise yourself with them. High fees and charges can have a big impact on a fund's returns. Examples of fees and charges are management fees, transaction costs and performance fees. 

Alternative investment funds for retail investors

  • An alternative investment fund (AIF) for retail investors is a mutual fund that is subject to investment limits in accordance with Chapter X of Act no. 45/2020 on Alternative Investment Fund Managers and has been endorsed by the Financial Supervision Committee of the Central Bank of Iceland.
  • An AIF for retail investors accepts funds from the public for collective investments.
  • An AIF invests in financial instruments and other liquid assets.
  • Investments in Alternative investment funds must be in accordance with the approved investment policy and investment limits.
  • A unit certificate is a certificate that proves the person's ownership in the relevant fund. 
  • AIFs for retail investors have much more extensive investment limits than UCITS funds so they can be riskier.
  • AIFs for retail investors have ample redemption obligations, such funds have up to three months to redeem (buy) unit certificates from a fund member. The redemption period is specified in the rules of each fund, and the operators must draw special attention to the redemption policy of an AIF for retail investors.
  • It is important to familiarise oneself with the key information document, which provides information on, among other things, investment limits, the asset portfolio, risk indicators and risk factors, recommended investment periods and costs incurred by the customer as a result of trading in the fund.
  • It is important to familiarise oneself with the fund's prospectus, which provides detailed information about the fund and its operators. There you will also find the rules of the fund.
  • A fund’s risk indicator is ranked on a scale of 1 to 7 and indicates how much the price/rate of the fund’s units fluctuates over a certain period of time. The higher the number is, the greater the volatility in the fund’s rate and the riskier it is therefore considered to be.
  • Each investor must assess his/her own risk appetite and risk tolerance, i.e. how important it is to protect the principal of the investment.
  • Costs, commissions and fees vary from fund to fund and it is very important to familiarise yourself with them. High fees and charges can have a big impact on a fund's returns. Examples of fees and charges are management fees, transaction costs and performance fees.
  • The Central Bank of Iceland grants operating licences to alternative investment fund management companies, approves Alternative investment funds for retail investors and supervises their activities to ensure they are in accordance with applicable laws and regulations.
  • The Central Bank of Iceland supervises to ensure that financial undertakings operate in accordance with rules no. 353/2022 on conduct of business, communications with customers, and the handling of complaints.
  • The Central Bank of Iceland receives comments from consumers if the practices of supervised entities are not in accordance with laws and regulations. You can submit a comment or query here.
  • The Central Bank of Iceland refers people to information on its website about consumer remedies but also guides consumers in other respects about the options available to them to assert their rights. Procedures of the Financial Supervision Authority of the Central Bank of Iceland regarding queries and notifications can be accessed here.
  • The Central Bank of Iceland does not have the power to rule on individual disputes nor does it determine the rights or obligations of parties under private law or resolve disputes over the merits of cases.