When you think of security in connection with investment funds, you probably mean the security of the invested capital first and foremost, or the reverse conclusion – namely the risk of capital losses. Another aspect of security is to be found in the form of legal regulations. In Austria, the legal framework for fund management is provided by the Investment Fund Act 2011 (InvFG 2011), which is based on EU guidelines. The InvFG 2011 forms the legal foundation for asset management companies and for the issue of investment funds in Austria, and contains detailed provisions for investor protection.

What does the Austrian Investment Fund Act regulate and what impact does it have on investors? It sets forth the basic principles of investment funds. This includes the requirement that each fund must generally invest in a pre-determined market in line with its rules. This means, for instance, that our Raiffeisen-Nachhaltigkeit-Europa-Aktien fund must for the most part invest in European equities which meet sustainability criteria. This means that even if the market situation is particularly volatile, the fund management is not allowed to switch to other asset classes (such as bonds) which might achieve better returns at that particular moment. It must instead seek diversification within the prescribed equities universe. The basic principles of investment funds also include:

• the separation of the management (asset management company) and the safekeeping (custodian bank) of fund assets;

• the fair determination of the fund price; the regular (usually daily) calculation of the net asset value and the valuation of the securities in the fund;

• and the equal treatment of all investors. The asset management company is obligated to treat investors fairly; in connection with the diversification of its funds and the distribution of units, it may not prioritise the interests of one investor over those of another.

The most important legally required characteristics of an investment fund are:

• Investment funds are portfolios of segregated assets: Funds are separated from the assets of the asset management company (fund company) as well as from those of the independent custodian bank, which holds the fund assets in safekeeping. These segregated assets are preserved, even in the extreme event that the asset management company or the custodian bank go bankrupt, and investors have recourse to these funds. This type of protection against bankruptcy applies to the fund units themselves; so, despite this, capital losses due to price volatility and other market risks may still occur in the case of investment funds.

• Joint ownership: Your capital contributions to the fund are added to the investment fund assets. These are jointly owned by all fund investors. Unit certificates (or investment certificates) document the corresponding proportion of assets that individual persons hold in the fund.

• Diversification: The fund assets must be invested in accordance with the basic principles of risk diversification as specified by the InvFG. The invested capital is spread out over various securities, sectors, and countries depending on the kind of fund, risk type, and the fund rules.

• A high degree of transparency is ensured for investors through annual and semi-annual reports, fund rules, prospectuses, key investor documents (KIDs), information about the fund on the website, etc.

• Regulation of asset management: The fund management is strictly regulated and supervised by independent auditors and by the Austrian Financial Market Authority (FMA). This supervision only concerns adherence to all requirements; therefore, it does not provide protection against price volatility that can typically occur with securities and investment funds or against other risks or capital losses.

The Raiffeisen-Nachhaltigkeit-Europa-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital. The investment strategy permits the fund to predominantly (relative to the associated risk) invest in derivatives.