At the end of 2014, for the first time in history of United States, investment funds had more assets than the commercial banks and accounted for 21,6% of the US financial system. In the European Union investment funds accounted for almost 20% of the financial system, while in Croatia investment funds accounted for only 2,6%. A continuation of the trend of decreasing importance of the banks in Croatia can be expected in the future, as well as increasing share of institutional investors, particularly investment funds, which means that it can be expected that investment funds will become increasingly important factor in the domestic financial system. Because of the expected growth of the importance of investment funds in Croatian financial system, the goal of this paper is to show the main characteristics and types of investment funds, policies and investment strategies and to explain the methods of measuring performance of investment funds and conduct an empirical analysis of post-crisis three-year period in the Republic of Croatia. The first part presents the theoretical framework related to investment funds, and after that presents an explanation of the methods of measuring performance and shows the regulatory framework and market analysis of investment funds in Croatia. At the end of the paper, theoretical framework is associated with practical application through the empirical analysis based on 55 open-end investment funds, so it can be possible to recognize certain patterns in the results, separately for each type of funds.