17 Flashcards
managed product
pool of capital gathered to buy securities according to a certain mandate. The pool seeds a fund managed by an investment professional that is paid a management fee to carry out the mandate.
Mandate either active or passive management.
Examples: ETF’s, mutual, hedge, segregated, PE, LSVCC, Closed end funds.
why growth in the market for managed and structured products?
Short-term yields have fallen to multi-decade lows. Investors continue to seek alternatives to fill the return shortfall.
growing trend in compensation models for Canadian investment managers
from commission-based to fee-based
common advantage between structured and managed products
Structured and managed products have different advantages and disadvantages. However, they have in common the advantage of economies of scale.
structured product
passive investment vehicle financially engineered to provide a specific risk and return characteristic. Structured product value tracks returns of an underlying asset, for example: mortgage loans, credit card receivables, equity indexes. Issuer uses economies of scale to package underlying assets individuals could not cost effectively assemble.
managed vs. structured product - structure
MP - mostly open-ended
SP - closed ended
managed vs. structured product - maturity date
MP - mostly none
SP - finite life
managed vs. structured product - holdings
MP - liquid and illiquid
SP - illiquid
managed vs. structured product - secondary market
MP - excellent to poor
SP - very poor
managed vs. structured product - management
MP - active OR passive
SP - passive
structured product - term?
SP has no active management of the underlying assets. The assets remain the same throughout the life of the product, and it is closed-end. The finite life of the underlying asset means that there is a natural maximum maturity date to the structured product.
