The term “fund” can take on a number of meanings. For instance, one of the most common ways by which this is used is to refer to an amount of money. In the context of a household budget, for example, an emergency fund may be an amount of money set aside for the purpose of funding unforeseen expenses. A project, on the other hand, may have an allocation for a contingency fund. This ensures that a supply of money is on hand for whichever purpose it may be needed for.
For businesses and organizations, such allocations are managed and tracked by way of fund accounting. This process promotes accountability by zeroing in on cash flows. Since this does not focus on profit as much as it does on ensuring transparency, this is somewhat more useful for cause-oriented organizations, non-profit operations, and similar undertakings.
In the context of investments and asset management, however, fund takes on a slightly different meaning, albeit one that is still somewhat related. A fund may be defined as a method or type of investment through which an amount of money is managed.
A trust fund, for instance, is an asset or group of assets which are set aside and managed for the benefit of an individual, usually for one who is a minor. Trust funds are commonly set up by parents or guardians in order to provide financial support for a child to benefit from once he reaches legal age or if anything untoward should happen to the parent. A trust can simply come in the form of a savings account, or it can include property or securities.
To ensure that such a fund is handled properly, the help of a fund manager may be employed. Fund managers are professionals who are well-versed in handling assets in order to meet the investment objectives of their clients. By employing the services of a fund manager, someone who is not very familiar with the various investment options may be given much-needed support and advice.
