What flexible funds are: characteristics and performance

Welcome to the dynamic world of flexible funds! Are you looking to maximize your investment while minimizing risks and maximizing returns? You’re in the right place. This article will guide you through the features, benefits, and performance of flexible funds, often referred to as diversified flexible management funds.

What Are Flexible Funds?

Flexible funds are Collective Investment Vehicles (CIVs) whose portfolio composition regularly evolves based on market opportunities. They may include a wide range of assets such as stocks and bonds, across geographical and sectoral levels. Let’s explore what makes these funds so special and how they can fit into your investment strategy.

Definition of Flexible Funds

Flexible funds, also known as diversified flexible management funds, are investment vehicles designed to constantly adapt to market conditions. Unlike other more rigid funds, their asset allocation can vary significantly based on the opportunities and risks perceived by the managers.

These funds are not limited to a single asset class. They can include a mix of stocks, bonds, and sometimes other assets like real estate investments or derivatives. The goal is to take advantage of market upturns while minimizing losses during downturns.

Asset Allocation

The allocation of flexible funds is often highly diversified. Depending on market conditions, managers may move funds between different asset classes. For example, during periods of high volatility, they may reduce exposure to stocks in favor of bonds or even cash. This flexibility not only allows for capturing high-performance opportunities but also better manages risk.

Types of Flexible Funds

Flexible funds come in several categories:

  • 100% Flexible: Asset class allocation can vary from 0 to 100%.
  • Equity Dominant: These funds favor stocks but remain flexible in their allocation.
  • Bond Dominant: Less volatile, these funds emphasize bonds.
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These funds are accessible directly or through life insurance contracts in unit-linked accounts. The latter mode of holding can offer interesting tax benefits, while allowing for active and diversified wealth management.

Flexible funds represent a dynamic and adaptable investment solution, capable of adjusting to fluctuations in financial markets. In the following sections, we will delve deeper into the features of these funds and explore their potential performance.

Features of Flexible Funds

Understanding the features of flexible households helps you assess their relevance to your investment portfolio. These features include active management, the use of leverage, and the absence of a benchmark index.

Active Management

The management of flexible funds is highly active. Allocation decisions can be made by a management team based on their analyses and convictions. However, in many cases, a sophisticated algorithm guides these investment choices. Managers can, however, take over discretionarily during periods of crisis or significant volatility.

Leverage Effect

To enhance their performance, managers of flexible funds often use leverage. This technique involves increasing the fund’s investment capacity through borrowing. As long as the gains exceed the borrowing costs, leverage is beneficial. However, be aware that in case of losses, the boomerang effect can amplify the losses.

Absence of a Benchmark Index

Unlike other funds, flexible funds do not have a fixed benchmark index. For example, a stock fund may compare itself to the CAC 40. However, given their adaptable nature, flexible funds are evaluated based on their ability to generate returns while limiting risks.

Hedging Strategies

Flexible funds also use derivatives or cash investments to protect against market contingencies. These hedging strategies aim to minimize potential losses in case of unfavorable market movements.

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Geographic and Sectoral Diversification

These funds benefit from broad diversification, both geographically and sectorially. This allows reducing the overall risk of the portfolio by not being overly exposed to a single region or industry.

Dynamic Allocation

The management of flexible funds is opportunistic. It adapts to financial markets in real time, allowing capturing rises and limiting downturns. This hyperactive management allows for maximum exposure to the upside and a reduction of the effects of market downturns.

Flexibility and Performance – The Winning Duo of Flexible Funds

Flexible funds are a valuable option for diversifying and energizing your investment portfolio. Their ability to adjust to market conditions and leverage different asset classes makes them a wise choice for savvy investors and those seeking an adaptable solution. Ultimately, success lies in a rigorous evaluation of performance and a clear understanding of associated risks. You are now ready to explore the fascinating world of flexible funds and consider how they can contribute to achieving your financial goals.