Although an investment company in the United States concerns itself primarily with the business of securities, the structure of the company may take many forms. The different kinds of US investment companies are as follows:
- Business Trust
- Limited Liability Company
In the US, investment companies receive money from the investors. The investors who put their money in these investment companies are liable to have a share of the respective company's profits as well as the losses.
Under normal circumstances, the execution of the assets and properties owned by the investment company decides its fate at the market. However the performance of the securities does not always mirror the performance of the company.
Federal laws in the United States have divided investment companies into three separate types:
- UIT - legally recognized as the Unit Investment Trusts
- Closed End Fund - legally recognized as closed end companies
- Mutual Fund - legally recognized as open end companies
Each of these investment companies has distinct characteristics. For example, unit investment trusts and the mutual funds are termed as "redeemable" in the United States investment market. The opposite is true of the closed end funds which are not so.
The different types of funds are as follows:
- Stock Fund
- Money Market Fund
- Bond Fund
- Interval Fund
- Index Fund
- Exchange Traded Fund
Hedge Funds are not considered investment companies as they conduct business on a more private scale. Following are the considerations that are responsible for a company not being considered an investment company under federal laws:
- Not more than 100 investors
- If the investors have sufficient investment assets
The Investment Company Act of 1940 basically governs the activities of investment companies in the United States. However the Securities Act of 1933 and the Securities Exchange Act of 1934 also have a say in the activities of the investment companies in the United States.