Mutual Funds

Overview

A Mutual Fund is a collective investment scheme that pools the assets of its investors and invests the money on behalf of those investors. The underlying logic of mutual funds is that they provide diverse investments — in stocks, bonds and cash — without requiring investors to make separate purchases and trades. Mutual funds allow investors to pool their money together with other investors to purchase a collection of stocks, bonds, or other securities that might be difficult to recreate on their own. This is often referred to as a portfolio. The price of the mutual fund, also known as its net asset value (NAV), is determined by the total value of the securities in the portfolio, divided by the number of the fund’s outstanding shares. This price fluctuates based on the value of the securities held by the portfolio at the end of each business day. Note that mutual fund investors do not actually own the securities in which the fund invests; they only own shares in the fund itself.

Legal Structure

In Ghana, a Mutual Fund is registered with the Securities and Exchange Commission (SEC) and is overseen by a board of directors (if organized as a corporation) or board of trustees (if organized as a trust). The board is charged with ensuring that the fund is managed in the best interests of the fund's investors and with hiring the fund manager and other service providers to the fund. The fund manager, also known as the fund sponsor or fund management company, trades (buys and sells) the fund's investments in accordance with the fund's investment objective. A fund manager must be an SEC registered investment advisor.

Types of Mutual Funds

Open-end funds

Open-end Mutual Funds must be willing to buy back their shares from their investors at the end of every business day at the net asset value computed that day. Most open-end funds also sell shares to the public every business day; these shares are also priced at net asset value. A professional investment manager oversees the portfolio, buying and selling securities as appropriate. The total investment in the fund will vary based on share purchases, share redemptions and fluctuation in market valuation. There is no legal limit on the number of shares that can be issued.

Closed-end funds

Closed-end funds generally issue shares to the public only once, when they are created through an initial public offering. Their shares are then listed for trading on a stock exchange. Investors who no longer wish to invest in the fund cannot sell their shares back to the fund (as they can with an open-end fund). Instead, they must sell their shares to another investor in the market; the price they receive may be significantly different from net asset value. It may be at a "premium" to net asset value (meaning that it is higher than net asset value) or, more commonly, at a "discount" to net asset value (meaning that it is lower than net asset value). Most of the Mutual Funds in the Ghanaian market are open-ended funds

Advantages of investing in a Mutual Fund

  • Increased diversification: A fund must hold many securities. Diversifying reduces risks compared to holding a single stock, bond, other available instruments.
  • Daily liquidity: This concept applies only to open-end funds. Shareholders may trade their holdings with the fund manager at the close of a trading day based on the closing net asset value of the fund's holdings. However, there may be fees and restrictions as stated in the fund prospectus. For holders of individual stocks, bonds, closed-end funds, and other available instruments, there may not be a buyer/seller for that instrument every day, making such investments less liquid.
  • Professional investment management: A highly variable aspect of a fund discussed in the prospectus. The fund manager has the staff and technical know-how to invest the funds effectively.
  • Ability to participate in investments that may be available only to larger investors.
  • Service and convenience: This is not a feature of a mutual fund, but rather a feature of the fund management company.
  • Government oversight: The SEC’s role with mutual funds is to require the publication of a prospectus describing the fund. There is no governmental oversight of a fund's investment success/failure.

Disadvantages of investing in a mutual fund

  • Fees
  • Less control over timing of recognition of gains
  • Less predictable income
  • No opportunity to customize

The SEM Capital Mutual Fund Family


The mutual funds in SEM Capital’s mutual fund family are all open-end funds. You can request for a prospectus on any of the funds by contacting us:


If you are interested in investing in Mutual Funds, kindly contact our Investment Representatives

Grace Quaye
Email address: gquaye@semcapitalgh.com
Phone No. +233 (0) 504 682 699

OR

Kevin Andoh
Email address: sandoh@semcapitalgh.com
Phone No. +233 (0) 241 807 198