In order to make the securities investment fund system more flexible, many countries allow corporate funds and contract funds to coexist, of which corporate funds are the most common in the United States, while contract funds are more common in the United Kingdom. At present, the funds established in China are all contractual funds. Then what is a contractual fund?

What is a contract fund?

Contractual fund, also known as unit trust fund, is an agency investment behavior organized based on certain contractual principles. It refers to the establishment of a fund management company jointly funded by specialized investment institutions (banks and enterprises). The fund management company acts as the principal and issues beneficiary certificates with the trustee in the form of "trust deed", that is, "certificates held by fund units" to raise idle funds in society.

Contractual funds are established by fund contracts signed between fund investors, fund managers and fund custodians. The rights of fund investors are mainly embodied in the terms of fund contracts, and the main aspects of fund contract terms are usually regulated by fund law. Beneficiaries are holders of beneficiary securities, ordinary investors and enjoy the right to distribute investment income. Generally, the trustee is a trust company or bank, which handles securities, cash management and other related agency business according to the regulations of trust deed.