The mutual funds  are way for collective investment of cash of multitude of investors in securities, with the purpose of obtaining profit from the investments. The beginning оf the concept of collective form of investment was laid down in the second half of the 18th century, when the Dutch trader and broker Adrian Van Ketwich invited investors to participate in the setting up of a trust allowing the individual investors with more modest means to allocate their investments. The next step was made in England nearly a century later with the laws from year 1862 and 1867, regulating the joint-stock companies. They allow investors to participate in the profit of an investment company, limiting simultaneously their liability up to the amount of the invested capital in the company. Immediately after that, in 1868 Foreign and Colonial Government Trust was established in London, which provided also to an“investor with modest possibilities the same advantages as the big capitalists ... by division of the investment in multitude of different shares”.The first real mutual fund was established early in the 20th century in the USA (Boston, year 1924) - Massachusetts Investment Trust. The novelty in it was the continuous issue of new shares upon   availability of new investors, and their redemption upon declared willingness by the existing shareholders, as well as the clear investment goals and limitations. In Bulgaria, according the Law on Public Offering of Securities (LPOS) the mutual funds exist in two legal forms – corporate and contractual. The corporate form, called open-end investment company, is a joint-stock company whose object of activity is investment in securities of cash raised through public offering of shares and which operates on the principle of risk diversification. The contractual form called contractual fund, is a separate property with the purpose of collective investment in securities of cash raised through public offering of units which is performed on the principle of risk diversification by an asset management company.Even though different in their form, the substance of an open-end investment company and of the contractual fund is one the same. You may see the scheme of the mutual funds’ operation here.

Investments in mutual funds are appropriate both for physical persons (individual investors), and for legal entities (corporate and institutional investors), who temporarily or in a long-term plan have available free cash and look for an investment alternative to the bank deposit which would bring them higher return and at the same time is liquid (the money could be withdrawn if needed, without losing the return accumulated until that time).

There are several major criteria for selection of a mutual fund, in which you are to invest. The most important of them are: who manages the fund’s operation and portfolio; which fund is appropriate for you ; what is the return till that time; in what securities are invested the assets (structure of the fund’s portfolio) and what investment strategy the fund follows; what are the entry and exit fees the fee for management of the fund’s operation; what is the minimal possible amount of investment, etc.

The investments (operation and portfolios) of the mutual funds are managed by an asset management company. The asset management companies are joint-stock companies licensed by a government authority – Financial Supervision Commission and carryout their activities under its supervision.

Asset management company of the TBI  Mutual funds  is TBI Asset Management, which as of  05/11/2010 manages and provides advisory services of more than BGN 1, 450  billion of large institutional and multitude of individual investors.

The methods of investment are mainly two types – direct and indirect way of investment. The first type is investment, where the investor takes decisions on his own and gives himself an order for purchase/ sale of securities. For the purpose, however, the investor must have available free time to monitor the stock exchange (the trade starts early in the morning and closes at midday), the skills to take the most appropriate investment decisions and last but no least , a large portfolio allowing a good diversification  (allocation of the means), which would reduce the risk.
The indirect method of investment is investment of individual cash in a common mutual fund, through which the asset management company invests in various securities.
The advantages of the indirect investment are that the investor entrusts his cash for professional management to financial managers, specialists in the field of the capital market, who analyzing the market and the securities offered on it, set up a diversified portfolio with the purpose of risk reduction. The second advantage if the indirect investment consists in reduction of the expenses for broker services as a result of the pooling of the resources and the possibility to buy bigger packages of securities (i.e. from economic viewpoint economies of scale are achieved and reduction of the transaction costs).

Risk of investments in mutual funds exists but it is proportionate and conformed with the return, i.e. the higher the expected return is, it could be achieved at the price of higher risk and vice versa, if the expected return is in lower limits, then the portfolio risk will be respectively lower, too. Depending on the type, the mutual funds follow different investment policy – conservative, low-risk, balanced or aggressive, which they pursue in the relevant risk level. This variety of investment possibilities allows every investor to estimate what return he would like to obtain and at what risk level he is inclined to invest. One of the advantages of the mutual funds is that the assets in the portfolio are many in number and different in type, and the individual risk of each asset is much higher than the general risk of the portfolio which consists of many and different securities.

The success of the mutual funds in many of the developed countries depends mainly on the legislative framework and the established regulations which are applied consistently. In Bulgaria the legislative framework has been defined and complied with the European Directives and strictly regulated. The regulatory government authority is the Financial Supervision Commission, which exercises documentary and active control over the operation of the mutual funds, which, in their turn, are obligated to present on a monthly basis their financial statements, as well as reports on the liquidity of the set up investment portfolio.
The investors’ cash is separated in an individual structure (mutual fund), other than the asset management company and are kept at a depository bank.
Influence over enhancement of the investments’ safety is also exercised  by the way in which the fund’s portfolio is structured, so that if the investment in a financial instrument is not profitable enough, or even losing at a certain time, the investment in another instrument from the portfolio is to compensate that and as a whole the portfolio to reach good return. The more and various assets are added to a portfolio, i.e. the more diversified it is, the more the risk reduces.
A guarantee for the safety of the investments in the fund is also the experience of the team managing the resources.  Asset management company TBI Asset Management operates since 2002 and on 1st of August, 2008  it managed and/ or advised on the management of assets at the amount of BGN 924 million. Last but not least, investors have available accessible and transparent information about the concerned mutual fund, as the methods of the portfolio management and the risks of investments in a mutual fund are described in detail in a Prospectus for Public Offering of shares/ units. Every investor has to make himself familiar with this Prospectus, before taking investment decision for his money.
Of course, to give guarantee about the investors’ money and future return is misleading, as this means that we know for certain what will happen on the capital market and how the prices of the securities in which the fund will invest will increase/ decrease. The forecasts and experience of the specialists, however, are of particular importance for the good result, and the diversity of investment products offers to everyone the possibility to estimate what result he would like to realize and what price he is ready to pay for that.

This is the most frequently asked question, which is of interest to every investor. The return depends mainly on that in what type of mutual fund you have chosen to invest (conservative, low-risk, balanced or aggressive) in what assets the fund invests, where the fun invests, what the state of the capital market for the period was, etc.
More specifically, the return of the TBI mutual funds is formed by first – investments in securities, i.e. incomes from interest, dividends; and second – growth of the securities value (capital gain).
Most of the mutual funds make forecasts of expected return, and for the TBI Mutual Funds for 2007it is respectively within the limits : 6 - 7% (for TBI Eurobond ), 8 – 10% (for TBI Comfort), 10 - 15% (for  TBI Harmony), over 15% (for TBI Dynamic)

The mutual funds are obligated at least twice weekly to calculate the issue value and the redemption price of their shares/ units. Thus every investor can easily calculate the accumulated until the current time return on his investment. Moreover, the investment in mutual funds is very liquid, i.e. if needed or at investors’ wish, a part of or all shares/ units declared for sale may quickly turn into money. This is certainly an advantage compared, for instance, with bank deposits, with which if the amount is withdrawn before the deposit’s due date, you will lose the interest.
Here you may inform yourself of the procedure of buying and redemption of shares/ units of the TBI Mutual funds.

The longer the period of an investment is, the greater the possibility of the mutual fund to realize higher return. As a whole, the investments in mutual funds have to be considered as long-term investment instruments, but still we may summarize that those in lower risk mutual funds usually are with the tendency to be with shorter term, while those in higher risk funds are respectively with longer period. In this relation, it will be appropriate investors to make a consultation what the recommendable period of investment in a given fund is. For example, the recommendable period for investments in TBI mutual funds is accordingly:
for TBI Eurobond – over 3 months
for TBI Comfort – over 6 months
for TBI Harmony – over 1 year
for TBI Dynamic – over 2-3 years

The main advantages are several:
A) Professional management of the investments – The comparatively modest resources of the average individual investor do not allow him to use the services of a professional in management of individual securities portfolio, but pooled together in a mutual fund, the resources of multitude of individual investors form a considerable cash resource, for whose management it will be economically advantageous to engage a professional portfolio manager – asset management company. These companies are licensed by the Financial Supervision Commission, which has established that they have the required material and human resources to ensure the investment process.
B) Diversification – Diversification means risk spreading by investment in many and various securities. This results in reduction of the portfolio’s general risk by the removal of the so called unique risk of anyone investment. The diversification is easy with a large securities portfolio (mutual fund) and difficult, almost impossible, with a small portfolio (individual investor).
C) Liquidity – Liquidity means a possibility an investment to turn promptly and easy in cash without this process to result in losses. The mutual funds are obligated to redeem the issued by them shares or units if such wish is expressed by investors. This is made at a fair price, based on the so called “net asset value of share/ unit”, which is calculated by deducting from the market value of the assets (securities), possessed by the mutual fund, its liabilities and the result is divided by the number of the shares/ units. Important specifics is that the transactions of issue (sale) and redemption of shares or units become at the first price, which will be calculated after the time of the order’s giving by the investor. This principle does not allow individual current or future investors to “play against” the mutual fund, i.e. against the other investors.
D) Diversity of investment possibilities – mutual funds have different investment goals and investment strategies. This great diversity allows the investor to select the fund which most accurately meets his investment objectives. In general, the mutual funds are classified in four main groups:

a.	Investing in money market instruments (money market-funds);
b.	Investing in bonds and other debt securities (bond-funds, such as TBI Eurobond and TBI Comfort );
c.	Investing simultaneously in shares and bonds (hybrid-funds, such as TBI Harmony );
d.	Investing in equities (equity-funds, such as TBI Dynamic).

There are no limitations in the amount of the investment, but the investment in a mutual fund must be equal at least to the issue value (the sale price) of one share/ one unit of the fund. Investment companies sell only whole shares, while the mutual funds (contractual funds) also offer fractional units, whose value is calculated to the fourth digit after the decimal point.

In practice, the risk of removal or dropping out of the currency board is exceptionally small. Eventual removal or dropping out of the currency board would have a negative effect on the value of investments only in case that the leva depreciates towards the euro. For customers who want to avoid this risk, Asset Management Company TBI Asset Management offers the service hedging (elimination of the foreign exchange risk) of the investments in leva and euro,  the cost of such operation being about 0,6% on annual basis. The hedging is an operation in which euro are bought against leva at a future date, thus eliminating the risk of eventual change in the rate of exchange.