Financial Market Instruments: Futures, Investment Funds, Shares

Understanding Futures Contracts

A futures contract is an obligation to buy or sell an underlying asset at a predetermined price on a specified future date. The benefit for a futures purchaser occurs if the market price of the asset at maturity is higher than the negotiated price. Conversely, the seller's profit occurs when the asset price at maturity is less than the agreed-upon futures price.

Investment Funds: Concept and Structure

Financial Investment Funds (FIFs) are collective investment vehicles where assets are pooled from a group of investors. These funds invest in various financial assets.

Key Components of Investment Funds:

• Management Company

  An administration and management company (often referred to as a Collective Investment Institution Management Company) handles the fund's operations. These corporations are compensated with commissions for their services.

• Depository Institution

  A depository institution, which can be a credit institution or a brokerage firm, is responsible for the fund's collections and payments. They also provide custody for all securities comprising the fund's investment portfolio.

Types of Investment Funds and Portfolio Composition

Investment funds can be categorized in several ways, often based on their investment strategy or asset allocation.

Classification by Profit Distribution:

• Accumulation Funds

  These funds reinvest any increases or decreases in equity, which are then reflected in the participation value.

• Distribution Funds

  These funds periodically distribute increases in value (profits) to their participants.

Classification by Asset Type:

• Money Market Funds

  Composed primarily of fixed-income securities and public or private repurchase agreements (repos) that are readily convertible to cash, as well as bank accounts.

• Bond Funds

  These funds invest predominantly in fixed-income securities, such as government or corporate bonds.

• Mixed Bond Funds

  The majority of investments (typically 70% to 90%) are in bonds, with the remainder in equities.

• Mixed Equity Funds

  Characterized by a significant proportion of equities in their portfolio, for example, 50% or more.

• Equity Funds

  Most or all of the portfolio consists of shares (equities).

• Treasury Funds (Fondtesoro)

  These funds specifically invest in public debt instruments.

• Real Estate Investment Funds

  Established to finance the construction of rental housing (often up to 90% of their assets). They invest the money received from their members into real estate assets.

Transmission of Unlisted Shares

If shares are represented by physical securities, their transmission requires a contract of sale and follows specific procedures based on their registration type:

• Registered Shares

  Transmission can be effected by ordinary endorsement or assignment. The titles are delivered to the issuing company, which cancels them and issues new ones to the new owner.

• Bearer Shares

  Transmission occurs through the physical delivery of the securities, in addition to the corresponding sales contract. In this case, a securities company, a broker, a credit institution, or, failing that, a notary, should be involved in the operation.