korkorahastot

Korkorahastot are a category of investment funds that invest primarily in fixed-income securities, such as government bonds, corporate bonds, and other debt instruments. Their aim is to provide regular income and capital preservation with generally lower volatility than equity funds. They are commonly offered as open-ended funds and may be bought and sold through fund managers, banks, and investment platforms.

Korkorahastot can be classified by duration and credit quality. Duration categories include short-, intermediate-, and long-term funds, reflecting the average time to maturity of the fund’s holdings. By credit quality, funds can be investment grade or non-investment grade (high yield). They can also differ by geography (domestic or international), currency exposure, and whether they are actively managed or passively track an index. Some funds specialize in government securities, while others invest in corporate or municipal debt.

How they work: The fund’s value is influenced by interest rate movements and the credit risk of its holdings. Longer-duration funds are more sensitive to fluctuations in rates. Yield depends on coupon payments and the credit quality of the issuers. Risks include interest rate risk, credit risk, liquidity risk, and, for funds with foreign investments, currency risk. Returns can be affected by management decisions in active funds or by tracking error in passive funds.

Costs and taxation: Fees typically include a management fee and an ongoing expense ratio, with potential entry or exit charges. Tax treatment in Finland generally passes income and gains to investors, who are taxed on distributions and realized gains according to Finnish tax rules, while the fund itself is usually not taxed as a separate entity.

Regulation: Korkorahastot are regulated under Finnish and EU fund frameworks, often UCITS-compliant, and overseen by Finanssivalvonta.