ABSTRACT
In this chapter we examine investment funds, which are financial products that combine into portfolios the debt and equity securities discussed in the last two chapters. We begin with a review of why and how investment funds are used, the general classes of funds, and the role diversification plays in the creation of funds. We then consider the main types of investment fund vehicles, including openend funds, closed-end funds, hedge funds and other alternative funds, and exchange-traded funds, and the strategies that portfolio managers use to create investor returns. We conclude by describing how different classes of investment fund shares are created, traded, and redeemed.
