External Fund

External Fund

1. A mutual fund that invests predominantly or exclusively in securities issued in foreign countries. An external fund does not necessarily concentrate on any single country, but it does not invest in securities from the country in which it operates. An external fund should not be confused with a global fund, which invests in both domestic and foreign securities. An external fund is also called an international fund.

2. Funding that a company raises from any source other than itself. Two common types of external funds are bond and stock issues. A company seeks external funds when it wishes to expand its operations or other activities, but lacks the cash flow to do it independently. Providers of external funds almost always expect to receive something in return; for example, bondholders expect interest and principle repayment, while stockholders expect to receive a portion of the ownership of the company.