Asset class and geographical focus

Based on its investment policy, the investment fund must be assigned to one of the following categories: equity funds, bond funds, real estate funds, mixed funds, hedge funds, money market funds or other funds.

If it invests principally or exclusively in shares, bonds or real estate, respectively, equity funds, bond funds or real estate funds must be selected. If an investment fund’s investment policy prescribes lower limits for investment in specific instruments, the term “mainly” must be read as "more than 50%". For instance, if an investment fund invests more than 50% of its assets in shares, it must report "equity fund". If an investment fund has set lower limits and only invests in two types of instrument, e.g. in shares and bonds, only fill in "mixed fund" if the lower limits for the two instruments are close to 50%. This does not require an exactly defined investment mix of 50/50.

If the investment fund has only set upper limits for investment in specific instruments, some flexibility must be observed in interpreting the phrase "mainly." In general, the following guidelines apply:

• If the fixed upper limit for a particular instrument type indicates that this asset class is assigned a prominent role, that investment fund must be classified in this asset class. For instance, if an investment fund’s investment policy states that the fund invests 90% of its assets in shares, it must be classified as an equity fund.
• If upper limits have been set exceeding 50% for several types of instruments without expressing an explicit preference for one of these asset classes, the investment fund must be classified as a mixed fund. For instance, if the investment strategy states that up to 60% of assets are invested in shares and up to 80% in bonds, the mixed fund category must be selected here.
• If upper limits exceeding 50% have been set for several types of instruments while at the same time defining the fund's primary investment objective under normal market conditions, the investment fund must be classified in accordance with that primary investment objective. For example, the investment policy states that up to 90% of assets will be invested in equities and up to 70% in bonds. In addition, it specifically states that, under normal market conditions, the primary objective is to hold an equity-oriented portfolio. In this example, the investment fund must be classified as an equity fund.

If the investment fund is classified as an equity fund, it must be further classified according to the regional focus of its investments. There are nine regions to choose from: Netherlands, Europe (EEA), Europe (including outside EEA), North America, South America, Africa, Asia/Pacific, Middle East and global.

If the investment fund is a real estate fund, it must be classified either as a direct or an indirect real estate fund. While direct real estate funds hold real estate themselves, investing in “bricks and mortar”, indirect real estate funds hold units of participation in direct real estate funds.

For the purposes of this report, hedge funds are investment funds with the following characteristics:

• positive absolute yields: they aim to achieve positive absolute yields (as opposed having a relative objective, such as outperforming a specific index or benchmark);
• relatively unlimited investment strategies: they have few restrictions in terms of the type of financial instruments in which they can invest or in terms of their investment strategy; they can use a large variety of investment techniques, including the use of leverage, derivatives, long and short positions in securities or other assets; and their rules on risk diversification are more flexible.
• performance fees: managers are generally remunerated in line with the fund’s performance on top of their traditional management fees.

Specific conditions apply in the case of money market funds.  Investment funds must be classified as money market funds if they:

• invest more than 85% of their assets in money market instruments, such as short-term deposits, or marketable debt instruments with maturities up to one year; and/or
• aim to achieve a return close to that of the money market interest, and
• the liquidity characteristics of the participations closely match those of deposits. Based on this definition, click/guarantee funds, for example, that invest 85% or more of their assets in short-term deposits must be classified as money market funds.

If an investment fund cannot be classified as an equity fund, a bond fund, a real estate fund, a mixed fund, a hedge fund or a money market fund on the basis of these rules, it must be classified as “other fund”.

Fund-of-funds (investment funds investing in units of participation issued by other investment funds) must be classified in the fund category in which they mainly invest. This classification is also subject to the above rules that apply to direct investment in instruments.