Sponsor The sponsor is generally a financial services company, such as a fund company, brokerage, bank or insurance company.

The sponsor contributes the initial capital to the fund and assembles the third parties needed to operate the fund.

In the United States, sponsors must register the fund with the SEC.

This registration document will become the fund's prospectus, which will describe the fund's sponsor, board of directors, investment objectives, allowed investment types, fund fees and risks.

The cost for a sponsor to register a fund and design corporate documents can run into the hundreds of thousands of dollars.

There are also costs associated with operating a fund.

The required expenses include accounting fees, basic service fees, custody fees, as well as transfer fees and regulatory fees.

Shareholder funds are for investors who purchase their shares.

Investors obtain detailed information about the fund through prospectuses, annual reports and other periodic reports.

By studying these documents, shareholders can determine whether the fund has achieved its objectives and followed its investment strategy.

***Shareholders of the same fund are entitled to vote for directors.

Changing the terms of the contract with the fund manager must also require their consent.

Changes to a fund's objectives and major policies usually require the approval of a majority of shareholders.

Board of Directors Shareholders elect a board of directors to oversee the work of fund management and portfolio managers.

The board of directors ensures that the fund manager's investments are consistent with the fund's objectives and that changes to the fund manager's contract or any changes to his fees are voted on.

The remuneration received by fund directors must be specified in the fund's prospectus.

Fund Managers Fund managers are sometimes called investment advisors.

They research, select and invest the fund's assets in specific securities based on the fund's investment objectives.

As professional money managers, fund managers have higher knowledge and professional abilities than ordinary investors.

This service allows small investors to enjoy the same research and expertise as large institutions or wealthy individuals.

An investment adviser is usually not an individual, but an affiliate of the sponsor or an independent investment management company.

The organizational structure of an investment advisory firm can take many forms.

Some company fund managers only manage one fund, while other fund managers may need to manage several funds in the same field or with the same goals at the same time.

When a team manages a fund, one or two individuals are appointed to lead the company.

They usually lead the work of subordinate managers, researchers, and analysts.

Fund managers typically visit many of the companies they are researching and use computational models to select securities for their portfolios.

They will also have access to advanced fund analysis tools and access to real-time financial information from multiple sources.

Investment advisory firms earn management fees, and individual fund managers may be compensated by a salary plus bonuses related to fund returns.

When investing in a fund, it is important to understand the history and experience of the fund manager.

The fund's prospectus provides detailed information, including the time the fund manager has managed the fund, the fund manager's educational background, other funds managed, and other information.

This information can be used to evaluate the capabilities of fund managers.

Does he have experience in bull and bear markets?

How does his performance compare to benchmark performance during market peaks and troughs?

The safest bet is to choose experienced fund managers who can maintain stable performance in both ups and downs.

Underwriters/Distributors Investors purchase or redeem fund shares either directly themselves or through a third party.

The third party is called an underwriter or distributor.

Distributors are critical to a fund's success because they are responsible for attracting investors to invest in the fund.

As competition in the industry intensifies, the role of distributors becomes increasingly important.

In order to bring the fund to the market, distributors need to prepare sales materials, brochures and consulting materials, and also need to design incentive mechanisms to encourage a variety of sales agents to promote sales.

Distributors can sell fund shares directly, or through brokers, financial planners, banks, insurance companies, or fund supermarkets.