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What are Mutual Funds?

Mutual Funds are aimed at the buying and selling of assets using funds from the sale of shares representing its capital to individuals, as well as the contracting of services and the implementation of other activities under the Mutual Funds Act (LSI).

Assets are defined as securities, certificates and other documents to which it applies the rules of the Securities Market Act (LMV) registered with the National Securities Registry (RNV) or listed on the International Quotations System (SIC), other securities, cash, assets, rights and credits, as documented in contracts and instruments, including those relating to financial transactions known as derivatives, and other things subject to trade in compliance with the investment regime under the Mutual Fund Act (LSI) and the general provisions to that effect issued by the CNBV for each type of Mutual Fund.

According to the LSI, there can only be four different types of mutual funds:

• Debt and Stocks Mutual Funds
• Debt Mutual funds;
• Capital Mutual Funds, and
• Mutual Funds with limited purpose.

Debt and Stocks Mutual Funds invest in assets to the nature of which corresponds to stocks, bonds and other securities, certificates or documents representing a debt owed by a third party.

Debt Mutual funds invest exclusively with debt securities or in other debt mutual fund’s shares

Capital Mutual Funds invest predominantly with assets whose nature corresponds to stocks or shares, debentures and bonds issued by companies promoted by the mutual fund that require resources in the medium and long term.

Mutual Funds with limited purpose invest exclusively in assets defined in its statutes and prospectuses.

Target

The possibility that a small investor can structure a portfolio customized to address his/her particular investment needs, is low to the extent that resources earmarked for this purpose are not sufficient to meet the requirements of brokerage firms for opening new accounts, or to buy securities in the amounts and proportions necessary to form the portfolio. 

Additionally, the small investor usually lacks the knowledge and/or time to build an adequately diversified portfolio, or to follow continuously the behavior of the market, so that he/she could detect the best investment opportunities.

Mutual Funds are, therefore, a viable option for a number of small investors who want to diversify their investments through the acquisition of a portfolio with a securities mixture that will closely match their needs for liquidity, their performance expectations and degree of risk aversion, regardless of the amount they invest.

Legal Basis

The legal structure of mutual funds was incorporated for the first time in Mexico in December 1950 in the Act Establishing the Rules of the Mutual Funds, which was succeeded by the Mutual Fund Act, enacted in December 1954 of ephemeral existence since it was abrogated by the Mutual Fund Act of December 1955. Later, this law was abrogated in 1985 and reformed again in 1986, 1989, 1992, 1993 and 1995. In June 2001, it was published in the Official Journal of the Federation (DOF) a new Mutual Fund Act, which entered into force on 5 December of that year.

With the issuance of the new Law on Mutual Funds (LSI), the intention was to update the legal framework of these institutions, to encourage their development, revitalize their capital formation and expand savings options for individuals, in accordance with the development given in other markets.​

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