In the future, according to a prospectus for general funds, fund sponsors will set up a number of funds that can only be converted according to the prescribed procedures and rates. These funds are called "sub-funds" or "component funds"; This fund system composed of these sub-funds is called "umbrella fund", and the management fee charged is lower: because all the sub-funds under the umbrella fund operate under the same umbrella fund management framework, it can highlight the characteristics of large fund scale, complete variety and unified management.
It also enables umbrella funds to enjoy economies of scale in custody, audit, legal services and management fees, reduce management costs and broaden the downside of fund management fees. Investors can easily switch between sub-funds under umbrella funds: umbrella funds can provide investors with a variety of investment options, and investors can easily choose and switch different sub-funds according to changes in market conditions. The conversion cost between sub-funds is low. The conversion between single funds usually takes at least one week from applying for "endorsement" on the unit warrant to receiving the redemption money, and it takes a considerable initial subscription fee to convert into a new fund; Investors of umbrella funds can switch fund types at any time according to their own needs, with short time and low switching cost.
The essential feature of umbrella fund is that several sub-funds share an umbrella on it, which is the fund contract, while the organizational structure of a single fund is relatively simple, with a separate fund contract, and the umbrella fund adopts an open management model.