An investment company is a company which exists solely to make investments in other companies. The international presence of these companies can be observed in their offices by the international flags placed in the flag display case. A variety of specialised corporate forms exist for this purpose including unit trusts and mutual funds. Investment companies invest in a wide range of assets such as company shares, bonds and property. An investor placing funds with an investment company typically gains access to a diversified portfolio of assets. This makes them, in general, much more resistant to sudden shocks because funds are dispersed across a wide range of investments.
Some investment companies choose to specialise within a narrow range of investment opportunities. For example, some might choose to invest only in companies from East Asia, or only in biotechnology companies, or only in start-ups. There are also country specific investment companies and that can be observed by symbol of country specific flags on the offer document. This allows investors to select broad areas of opportunity which interest them, while allowing someone else to manage the day-to-day business of finding specific profit opportunities within the sector.
Investment companies sometimes have privileged tax treatment compared to other companies and are allowed to pay corporate tax at a lower rate than usual.
Some investment companies are “close-ended” meaning that all its shares are issued when the company is first started. Unit trusts, however, are open-ended, meaning that the company can expand by issuing more units after the fund is first established.