Collective Investment in Transferable Securities:
Mutual Funds & SICAV
COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES (CITS)
Collective Investment in Transferable Securities (CITS) are entities whose purpose is to attract funds from multiple investors to be jointly managed and invested in assets, rights, securities or other instruments in order to obtain a return.
CITS can invest in both financial and non-financial assets. Those that invest in financial assets can be of two types: Mutual Funds (FI) and Variable Capital Investment Companies (SICAV).
- Mutual Funds: They are CITS without legal personality. This implies that the administration, representation and management of the different assets that make up the fund falls to entities qualified for this purpose, such as the CITS Management Companies. Their assets are divided into shares.
- Variable Capital Investment Companies (SICAV): These are CITS in the form of stock corporation. They have two governing bodies, the Board of Directors and the General Shareholders’ Meeting. These two organs are responsible for the administration, representation and management of the different assets that make up the Company. The Company may delegate its functions to qualified entities such as the CITS Management Companies. Their assets are divided into shares.
For each CITS, there are two key entities, the CITS Management Companies and the Custodian Entities. These entities allow the good functioning of the CITS thanks to the control and supervision that they exercise mutually.
CITS Management Companies (SGIIC) are public limited companies whose corporate purpose is the management, administration and representation of investment funds and companies.
Depository Entities are qualified financial entities that assume the custody of the securities, cash and, in general, the assets that are the object of the investments of collective investment institutions.
Advantages of investing in CITS (FI and SICAV):
- CITS are subject to Corporation Tax, but are taxed at a reduced rate of 1%. The participants or shareholders, in addition to benefiting from this reduced rate, defer the payment of the IRPF tax until the reimbursement of the shares/participations, with the consequent tax benefit.
- Diversification of risk: The current regulation on CITS limits the risk by setting limits on the concentration of the investment.
- Transparency: The current regulation also guarantees transparent management and exhaustive management control.
- As it is a highly regulated activity, it guarantees a high degree of legal security for investors.
- The assets of the CITS, being made up of multiple investors, allow access to certain financial assets with reduced operating and investment costs.
- It is a highly liquid and flexible asset, allowing investors to invest or divest their shares whenever they wish.
- Professionalised investment management, carried out by experts.