This type of arrangement originated in the European investment management industry, most notably with the SICAV (an open-ended collective investment). The SICAV model was copied for the UK Open-ended investment company (OEIC) and offshore fund models.
The umbrella fund structure makes it cheaper for investors to move from one sub-fund to another and saves the investment manager costs relating to regulatory duplication. An umbrella fund can also be set up to provide retirement, death and other benefits to members of a participating employer. In such a fund there are several participating employers who enjoy more or less the same benefits and the fund is managed by professional trustees. They cut the cost by saving on maintenance and management fees and sometimes take advantage of reduced tax rates. An umbrella fund is appropriate for employers who are too small to extract scale benefits from a stand-alone fund.
- Other umbrella terms
- De Lavenere Lussan, Jerome (2012), The Financial Times Guide to Investing in Funds: How to Select Investments, FT Press, p. 2, ISBN 0273732854.
- Official Umbrella services website