What characterizes a Feeder Fund in the context of UITFs?

A Feeder Fund in the context of Unit Investment Trust Funds (UITFs) is characterized by its requirement to invest a significant portion—at least 90%—of its assets in a single collective investment scheme. This means that the Feeder Fund primarily channels its investments into one specific fund, thereby pooling investors' resources to enhance the potential returns from that chosen collective investment scheme. By doing so, it benefits from the expertise and management of that specific fund, allowing investors to gain exposure to its underlying assets or investment strategy without directly investing in it.

This structure is particularly advantageous for investors seeking access to specialized or diversified investment opportunities that might be difficult to achieve on their own. In contrast, the other options presented do not accurately capture the defining characteristics of a Feeder Fund. For instance, investing in multiple schemes without restrictions, focusing exclusively on international markets, or providing guarantees on principal are not features that apply to Feeder Funds, as their primary focus is the concentrated investment strategy aimed at maximizing potential returns from a defined target investment.