sinking fund, sum set apart periodically from the income of a government or a business and allowed to accumulate in order ultimately to pay off a debt. A preferred investment for a sinking fund is the purchase of the government's or firm's bonds that are to be paid off. Usually the fund is administered by a trustee. See amortization.

mutual fund, in finance, investment company or trust that has a very fluid capital stock. It is unique in that at any time it can sell or redeem any of its outstanding shares at net asset value (i.e., the price of a share equals total assets minus liabilities divided by the total number of shares). A mutual fund, also called an open-end investment company, owns the securities of several corporations and receives dividends on the shares that it holds. A closed-end investment company differs from an open-end company in that the number of shares is limited and the price of the shares may fluctuate above and below the net asset value. The earnings of a mutual fund are distributed to the holders of its shares. It is hoped that a loss on one holding will be made up by a gain on another. The holders of mutual-fund shares thus gain the advantage of diversification, which might ordinarily be beyond their means. Common mutual funds, which often provide skilled management for security holdings, include stock, bond, balanced, index, and money-market funds. Stock funds mainly invest in common shares, and bond funds in bonds; such funds may specialize in a particular category of stocks or bonds (such as Internet stocks or municipal bonds). A balanced fund might invest in preferred stocks and bonds in addition to common stocks. Index funds invest in a portfolio that mimics a given index, such as the stocks that make up the S&P 500. The forerunner of the modern mutual fund was established in Belgium in 1822, and the use of these closed-end investment companies soon spread to Great Britain and France. They became popular in the United States in the 1920s, but from the 1930s the open-end mutual fund became more popular. Mutual funds experienced a period of tremendous growth after World War II, especially in the 1980s and 90s.

money-market fund, type of mutual fund that invests in high-yielding, short-term money-market instruments, such as U.S. government securities, commercial paper, and certificates of deposit. Returns of money-market funds usually parallel the movement of short-term interest rates. Some funds buy only U.S. government securities, such as Treasury bills, while general-purpose funds invest in various types of short-term paper. They became enormously popular with investors in the early 1980s because of their high yields, relative safety, and high liquidity. Investment in money-market funds soared from $20 billion in the late 1970s to over $150 billion in the early 1980s. Much of the growth came at the expense of banks and thrift institutions. With the recession of the late 1980s and early 1990s, interest rates (and, temporarily, the popularity of the funds) dropped. By 1999 more than $800 billion was invested in U.S. money-market funds.

hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" positions (borrowing money to speculate on undervalued stocks; see hedging; speculation), but not all so-called hedge funds are actively involved in hedging. In general, hedge funds, besides being unregulated, are investment capital funds that are limited to wealthy investors and large institutions, that are structured as partnerships, and that use investment strategies involving higher risks in an attempt to produce greater financial gains. The fees associated with hedge funds are high, and can reduce the returns to levels in line with investments involving lower risks. Aggressive hedge funds work with highly leveraged securities, often purchased with less than 5% of actual investor capital, with banks covering the balance. Macro hedge funds speculate in currencies of various countries; financial analysts and government officials blamed such funds, including George Soros's Quantum fund, for disrupting the economies of Asian and Latin American countries in 1998. Other funds speculate in gold and other volatile commodities, or simultaneously buy and sell a stock or other financial instrument in two different markets to profit on the difference in value in the two markets (a technique called arbitrage). Funds are classified as U.S. or offshore; U.S. hedge funds are private investment partnerships that generally invest in traded securities. Offshore hedge funds (normally not open to U.S. investors) are mutual fund companies.

Hedge funds came to public view in 1998 when Long-Term Capital Management (a U.S. fund) nearly collapsed, requiring a $3.5 billion bailout organized by the Federal Reserve Bank of New York and paid by private banks. The bailout led to a number of U.S. and international investigations into hedge funds and calls for greater regulation and scrutiny. An attempt by the Securities and Exchange Commission in 2004 to require hedge funds to register with it was overturned by the federal courts. In 2006 a another major U.S. hedge fund collapse, that of Amaranth Advisors, cost investors more than $6 billion. By 2007 the assets of such funds were estimated at more than $1 trillion; in February of that year the Bush adminstration and U.S. financial regulators rejected increasing the regulation of the funds and instead recommended that persons, institutions, and banks engage in sound practices before investing in or lending to a hedge fund.

fund-raising, large-scale soliciting of voluntary contributions, especially in the United States. Fund-raising is widely undertaken by charitable organizations, educational institutions, and political groups to acquire sufficient funds to support their activities. Among the methods used are door-to-door appeals, direct-mail campaigns, charity dinners and testimonials, charity balls, benefit entertainments, and, more recently, televised appeals and telephone solicitation. These techniques are generally accompanied by advertising and public relations campaigns. Before World War I private social agencies conducted individual fund-raising drives in their own communities, but with the war came the start of federated drives conducted by several agencies for purposes related to the war effort. The community chest movement had its origin in these federated efforts. These joint efforts were highly successful in that they raised more money at a considerably lower cost. The United Way of America is now the national association of all community chests and community welfare councils. In addition to federated drives, the period following World War I also saw the development of professional organizations that raise funds for a percentage of the total. Although the united fund movement spread rapidly, many agencies still chose to conduct independent campaigns, notably the health-promoting organizations. After the American Red Cross reversed its position in the 1950s and allowed local chapters to join United Way drives, most health groups did likewise. Fund-raising for political purposes has led to demands for national and state regulation of such activities.

Worldwide Fund for Nature: see World Wildlife Fund.

World Wildlife Fund (WWF), international organization formed to raise money for conservation projects, est. 1961. The international organization, believing that its name no longer reflected the scope of its activities, became the Worldwide Fund for Nature in 1986, but the affiliated groups in the United States and Canada retained the original name. The organization now typically refers to itself as WWF—The Conservation Organization, or simply WWF. It has been responsible for international agreements on conservation and has supported research on endangered species, including the giant panda, its symbol.

United Nations Children's Fund (UNICEF), an affiliated agency of the United Nations. It was established in 1946 as the United Nations International Children's Emergency Fund. UNICEF is concerned with assisting children and adolescents throughout the world, particularly in devastated areas and developing countries. Unlike most United Nations agencies, UNICEF is financed through voluntary contributions from governments and individuals, rather than by regular assessments. National UNICEF committees collaborate with UNICEF in various projects. UNICEF was awarded the Nobel Peace Prize in 1965.

International Fund for Agricultural Development(IFAD), specialized agency of the United Nations with headquarters in Rome, Italy. IFAD grew out of the 1974 World Food Conference; it was established in 1977 and is comprised of 165 member nations. The IFAD's mandate is to combat hunger and rural poverty in developing countries through agricultural projects that mainly attempt to improve productivity. These varied programs, which introduce new strategies and expand existing techniques, are aimed at such groups as small farmers, landless rural residents, nomadic pastoralists, small-scale fishermen, and poor rural women. As of 2001, IFAD had financed almost 600 projects in 115 countries, committing nearly $7.4 billion in grants and loans.

Commonwealth Fund, foundation established (1918) by Anna M. Harkness, wife of Stephen V. Harkness, an early Standard Oil investor, "for the welfare of mankind." Its headquarters are in New York City. In 1998 its assets were estimated at over $536 million, and it dispensed nearly $23 million. Contributing in its first 20 years to the early development of child guidance clinics and the strengthening of rural hospitals and health departments, in later years it has emphasized health care services, especially for minorities, and the advancement of the well-being of elderly people and children. It also has an international program in health care policy.

Company, often a commercial bank, acting as trustee for individuals and businesses and providing related financial or estate-planning services. Trust services for individuals commonly include the administration of estates, living trusts (trusts that become effective during the lifetimes of their makers, or settlors), and testamentary trusts (trusts originating in a will). Services for businesses include the administration of corporate bond indentures and corporate pension funds. Trust companies may also serve as corporate stock registrars and as paying agents for the distribution of dividends.

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In law, a relationship between parties in which one, the trustee or fiduciary, has the power to manage property, and the other, the beneficiary, has the privilege of receiving the benefits from that property. Trusts are used in a variety of contexts, most notably in family settlements and in charitable gifts. The traditional requirements of a trust are a named beneficiary and trustee, an identified property (constituting the principal of the trust), and delivery of the property to the trustee with the intent to create a trust. Trusts are often created for the sake of advantageous tax treatment (including exemption). A charitable trust, unlike most trusts, does not require definite beneficiaries and may exist in perpetuity. Seealso trust company.

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or closed-end trust

Financial organization that pools the funds of its shareholders and invests them in a diversified portfolio of securities. It differs from a mutual fund, which issues units representing diversified holdings rather than shares in the company itself. Investment trusts have a fixed number of shares for sale; their price depends on the market value of the underlying securities and on the demand for and supply of shares. The first modern investment trusts were formed in England and Scotland as early as 1860. Many early U.S. investment trusts failed with the collapse of the stock market in 1929, but others have since prospered under stricter federal regulation.

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Group of advisers to Franklin Roosevelt in his 1932 presidential campaign. Its principal members were the Columbia University professors Raymond Moley, Rexford Tugwell, and Adolf A. Berle, Jr. (1895–1971). They presented Roosevelt with analyses of national social and economic problems and helped him devise public-policy solutions. The group did not meet after Roosevelt became president, but members served in government posts. Seealso New Deal.

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Fund set aside by a corporation or government agency for the purpose of periodically redeeming bonds, debentures, and preferred stocks. The fund is accumulated from earnings, and payments into the fund may be based on either a fixed percentage of the outstanding debt or a fixed percentage of profits. Sinking funds are administered separately from the corporation's working funds by a trust company or trustee. The purpose of a sinking fund is to assure investors that provision has been made for the repayment of bonds at maturity.

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or unit trust or open-end trust

Company that invests the funds of its subscribers in diversified securities and issues units representing shares in those holdings. It differs from an investment trust, which issues shares in the company itself. While investment trusts have a fixed capitalization and a limited number of shares for sale, mutual funds make a continuous offering of new shares at net asset value (plus a sales charge) and redeem their shares on demand at net asset value, determined daily by the market value of the securities they hold.

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in full United Nations Children's Fund formerly (1946–53) United Nations International Children's Emergency Fund

Special United Nations program for aiding national efforts to improve the health, nutrition, education, and general welfare of children. Its original purpose was to provide relief to children in countries devastated by World War II. After 1950 it turned to general programs for the improvement of children's welfare. It was awarded the Nobel Prize for Peace in 1965. UNICEF has focused its efforts on areas in which relatively small expenditures can have a significant impact on the lives of the most disadvantaged children, such as the prevention and treatment of disease. UNICEF also provides funding for health services, educational facilities, and other welfare services. It is headquartered in New York City.

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Specialized agency of the United Nations system. It was conceived at the Bretton Woods Conference (1944) and officially founded in 1945 as a voluntary cooperative institution to help ensure the smooth international buying and selling of currency. More than 180 countries are members of the IMF. Its principal functions are stabilizing currency-exchange rates, financing the short-term balance-of-payments deficits of member countries, and providing advice and technical assistance to borrowing countries. Members contribute operating funds and receive voting rights according to their volume of international trade, national income, and international reserve holdings; the U.S. holds in excess of one-sixth of the voting rights, more than twice the percentage of any other member. The IMF has no coercive power over members, but it can refuse to lend money to members that do not agree to adhere to its policies; as a last resort it can ask members to withdraw from the organization. Critics of the IMF contend that the austerity and privatization measures it requires of borrowing countries reduce economic growth, deepen and prolong financial crises, and create severe hardships for the world's poorest people. Seealso International Bank for Reconstruction and Development; World Bank.

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