Open-Ended Mutual Funds

• This type of FOREX fund allows investors to buy and sell fund shares by transacting with the fund company. Shares are created and destroyed as needed, and divide the ownership of the assets under management by the fund company. The price of each share, called the Net Asset Value, or NAV, reflects the current value of the underlying FOREX investments divided by the current number of issued fund shares. Open-Ended Mutual Funds, or OEMF, shares can be purchased and sold only at the end of each trading day when the shares receive their newly-calculated daily NAV.
  
  

Closed-End Mutual Funds

• A Closed-End Mutual Fund, CEMF, trades like a stock on an exchange -- investors buy and sell shares from each other, not from the fund company. The price of each share is a function of supply and demand, and may differ substantially from the share's NAV. The fund manager issues new shares periodically through Initial Public Offerings. Because these IPOs dilute existing share value, current owners are allowed the right of first purchase at a discount to the price paid by non-owners. Fund managers may buy back shares in the open market when the shares are selling for a substantial discount -- this has the effect of narrowing the gap between the shares actual price and NAV. In some cases, closed-end funds have converted to open-ended ones, allowing shareholders to capture the value of the discount from NAV.
  
  

Exchange-Traded Funds

• ETFs are an alternative to OEMFs: the trade at their NAV, but are traded on an exchange, not through the fund company. An ETF's assets consist of currency pairs and/or currency derivatives (options and futures). The ETF fund manager trades in such manner as to mirror the price movements of individual currency pairs. ETF fees are among the lowest available for a FOREX investment, typically clustering around 0.15 percent of assets under management. Unlike OEMFs but similar to CEMFs, you can short ETFs (sell borrowed shares for later repurchase), place limit orders (purchase or sell at a specified price), and purchase shares on margin (using broker-supplied borrowed funds collateralized by the shares).
  
  

Currency Hedge Funds

• Currency Hedge Funds, called CHFs, are commodity pools established for investors who meet certain requirements as to wealth and trading sophistication. CHF managers can use all trading techniques including the use of esoteric options and forward contracts not available in other vehicles. CHFs have the highest fee structures. Besides a one to two percent charge for funds under management, CHF typically charge 15 to 30 percent on any profits arising from their trading activities. CHFs can lock up investment funds for months after they are deposited; an investor is prohibited from withdrawing a locked-up investment.