Fund mandate

The mandate of a collective investment vehicle is a statement of its aims, the limits within which it is supposed to invest, and the investment policy it should follow.

A fund (or portfolio) will typically define:

• the aim of the fund (e.g., to generate dividend income or long term growth)
• the type of strategy it will follow (which will tend to follow from the above)
• what regions it will invest in (UK, Europe, emerging markets, etc.)
• what sectors it will invest in.
• what types of securities it will invest in (equities, bonds, convertibles, derivatives, etc.)
• whether the fund will short sell and whether it will be hedged
• whether it will be geared and to what extent
• a benchmark index that the fund aims to beat (or match if it is a tracker fund),
• the maximum error in tracking the benchmark.

Fund mandates are set by the fund management company, but publicised so that investors can choose a fund that suits their requirements.

There are also legal limits on how some types of investment vehicle can invest.