Public funds include investment vehicles such as hedge funds and mutual funds that not only run or manage assets on behalf of investors but also issue equity shares in the financial markets for investors to buy and sell. By nature, trading in the public markets requires more transparency than would otherwise be the case, and because the nature of hedge funds is quite private, there are fewer public funds in the realm of hedge funds than in mutual funds. Of those hedge funds and mutual funds that trade in the public markets, it usually is the largest funds that issue shares.
The same regulation that individual companies comply with must be adhered to regarding public funds. This affects financial disclosure because public companies are required to report those findings on a consistent basis, such as quarterly and yearly. As a result, investors gain a glimpse into a public fund's profitability or bottom-line growth in addition to revenue or sales performance. This gives investors something of an edge because financial results represent the financial health of a firm, so accessing profit and sales growth is an indication of the amount of money flowing either into that firm's investment vehicles or away from them.
All investors do not have access to a hedge fund or mutual fund's top portfolio managers, especially in the case of large fund companies. When investors select public funds, however, this changes. A public company will hold a public conference call after reporting financial results.
On this call, top company executives discuss the financial results and goals of that firm, and investors can participate. Also, a public fund likely will hold an annual shareholder's meeting. This is an opportunity for investors to attend, to vote on key events happening at that public fund and to meet the portfolio managers who are running public funds.
An exchange-traded fund (ETF) is another type of public fund. This investment vehicle is an index comprised of other publicly traded securities, mainly stocks. The index tracks the performance of the underlying stocks, and because it is a public fund, it also is assigned a value in the financial markets. ETFs, in addition to publicly traded mutual funds and hedge funds, are assigned trading symbols in the financial markets so that investors can track the value of the funds as investments and compare their performance to other funds.
