17 - Managed & Structured

Question 1

What two types of account structures are possible for managed products?

Answer 1

Pooled accounts and separately managed accounts

Question 2

A structured product is active or passive investment vehicle?

Answer 2

Passive

Question 3

What types of products are considered “managed products”?

Answer 3

ETFs, hedge funds, mutual funds, segregated funds, private equity funds, closed end funds, and labour-sponsored venture capital corporations.

Question 4

What are some examples of a structured product’s underlying assets?

Answer 4

Mortgages, car loans, credit cards receivable, equity indexes.

Question 5

Managed Products have open vs closed structure, maturity date, liquidity, secondary market, performance goal?

Answer 5

Open ended
typically no maturity dates
liquid&not
excellent to poor secondary mkt
goal: returns or risk reduction

Question 6

Structured Products have open vs closed structure, maturity date, liquidity, secondary market, performance goal?

Answer 6

Closed
Finite life
Illiquid
Very poor secondary mkt
Goal=risk reduction

Question 7

What are 6 advantages of Managed Products?

Answer 7

1. Xp of professional mgmt
2. Economies of scale from pooled funds
3. Diversification
4. Liquidity & flexibility
5. Potential tax benefits (LSVCC)
6. Low cost options (ETFs)

Question 8

What are 5 advantages of structured products?

Answer 8

1. Xp of pro mgmt
2. Economies of scale
3. Diversification
4. Higher yield
5. High probability of return on principal

Question 9

What are 4 disadvantages of Managed Products?

Answer 9

1. Lack of transparency
2. Some liquidity constraints
3. Some very high fees
4. Volatile returns

Question 10

What are 3 disadvantages of Structured Products?

Answer 10

1. Complexity
2. High cost
3. Illiquidity of secondary mkt

Question 11

What are some risks common to managed and structured products?

Answer 11

1. Credit
2. Inflation
3. Currency
4. Prepayment (MBS)
5. Manager

Question 12

What is a pooled investment fund that is highly regulated and unleveraged?

Answer 12

Mutual funds

Question 13

What is a pooled fund that is unregulated and leveraged?

Answer 13

Hedge fund

Question 14

What is a pooled fund that closely tracks the underlying asset(s)?

Answer 14

Exchange Traded Funds

Question 15

What is a pooled fund with a finite number of units?

Answer 15

Closed End Fund

Question 16

What is a pooled fund buying full ownership of private firms?

Answer 16

Listed private equity fund

Question 17

What type has equity shares that provide federal and provincial tax breaks?

Answer 17

Labour sponsored venture capital corporations

Question 18

What combines a mutual fund with a life insurance policy?

Answer 18

Segregated funds

Question 19

What is a debt-like security with with equity linked returns? (Uses derivatives and bonds).

Answer 19

Principal protected notes (PPN)

Question 20

What are bank issued debt securities with returns that are linked to an equity index?

Answer 20

Index-linked GICs

Question 21

What are equity securities with a separate claim on the dividend and the capital cash flow from a holding of underlying stocks?

Answer 21

Split shares

Question 22

What are long term subordinated debt with features of preferred shares and corporate bonds?

Answer 22

Canadian originated preferred shares (COPrS)

Question 23

What are medium to long term bond with equal claim on the principal and interest cash flows from a pool of mortgages?

Answer 23

Mortgage backed securities

Question 24

What are short to medium term bonds with equal claim on the principal and interest cash pools from a pool of receivables (eg consumer loans)?

Answer 24

Asset backed securities

Question 25

What 6 factors have lead to the growth of managed and structured products?

Answer 25

1. Search for yield
2. Growth in passive investing
3. Demographics
4. Bull market in bonds
5. Product innovations
6. Cheaper commissions & faster computers