Collective Investment Schemes (CIS) are pools of investor funds that are managed on their behalf by a professional fund manager. These schemes have clearly spelt out investment objectives which determine where funds are invested. Funds are therefore invested in different classes of investments such as bonds, stocks, commercial paper and short term government securities among others. Collective investment schemes in Ghana take the form of either a Mutual Fund or a Unit Trust.

An investor partaking in one of these schemes receives units or shares that represent his/her pro-rata share of the pool of funds in return for putting money into these funds. The prices of these shares will fluctuate daily as the underlying value of the assets will sometimes rise or fall.  Additionally, the total value of the fund will be divided by the number of shares issued, therefore an investors individual stake will also rise and fall to reflect this. The fund manager is also compensated for administering the fund and managing the portfolio by charging a fee (usually a percentage) on the value of the funds under management.

Benefits of Collective Investment Schemes

· CIS are run by professional managers with the skills, experience and resources required to take necessary decisions on how much, where and when to invest. It is also comforting for the investor to know that, these fund managers operate in a highly regulated environment.

· Funds pooled together under CIS are invested in different investment classes and thus attaining diversification, a key element in risk mitigation. This however does not fully insulate the fund against market risk.

· Individuals can take advantage of the power of ‘’bulk buying’’ by pooling their funds together no matter how small. This feature also makes CIS’ cost effective.

· CIS enable investors to get access to their funds whenever they need to, thereby enhancing liquidity.

These funds are also regulated by the Securities and Exchange Commission (SEC) of Ghana thus ensuring strict compliance to laid down regulations.