2.5 Collective Investments Flashcards
What is collective investment
An arrangements that enables a number of investors to pool their assets and have these professionally managed by an independent manager
Unregulated collective investment scheme in UK
UCIS (hedge fund)
Regulated collective investment scheme in UK
Recognized: UCITS. can market to EEA
Authorized: Domestic funds- market to domestic only
What restrictions do regular collective investment schemes have
- concentration (must be diversified)
- controlling interest (max exposure to a company)
- Borrowing (cannot be highly geared)
Look at summary table
Investment trust
Legal structure
open/closed
holdings
supervision
managed
investment rules
borrowing powers
pricing
value
Company
Closed ended
Shares
Independent auditors
Fund manager
Flexibility
Can borrow
Bid-offer
Market sentiment
Unit trust
Legal structure
open/closed
holdings
supervision
managed
investment rules
borrowing powers
pricing
value
Trust
open ended
units
Trustee
Fund manager
Defined rules
limited ability to borrow
bid-offer
NAV
OEIC/ICVC
Legal structure
open/closed
holdings
supervision
managed
investment rules
borrowing powers
pricing
value
Company
Open
Shares
Depositary
AUTHORISED CORPORATE DIRECTOR
Defined rules
Limited ability to borrow
SINGLE
NAV
Is SICAU open or closed
open ended
What does open ended mean
Supply can be changed infinitely to match demand
Units/shares not transferrable
No secondary market
Major disadvantage of CIS
Lack of price transparency - true value of unit assessed once a day
What can closed ended funds do
- Shares trade on secondary market (ordinary and preference)
- Can use gearing
_ can invest in unquoted private companies
What is a venture capital trust
Closed ended vehicles, which invest in relatively new start up companies. traded on LSE
What is a split investment trust
Companies set up for limited period eg 5 years
Issues 3 types of shares
- 0 div pref
- Income shares
- Capital shares (no income), whatever left after above paid
What is an ETF (exchanged traded fund)
Open ended, trades at NAV
BUT ALSO TRADEABLE ON SECONDARY market
Difference between structured deposit and structured investment
Structured deposit- returns on deposit linked to performance of another asset (affects interest). GUARANTEED BY FSCS
Structured investment has NO FSCS GUARANTEE
LOOK AT PAYOUT STRUCTURES
Disadvantage of open ended property fund
Management costs can erode returns
Redemption moratoria- redemptions infrequent
Who is responsible for repairs in residential vs commercial property
residential - landlord responsible
commercial - tenant responsible
From which of the following organisations would an investor normally buy shares in an exchange-traded fund?
Broker
Shares in an ETF would normally be purchased from a broker as they trade on exchange.
Which of the following products can be traded real-time, giving an investor the ability to track an index at low cost?
ETF
With regard to an open-ended investment company, where would you acquire shares?
Authorised corporate director
Who can an investor buy units in a unit trust from?
Manager
How are shares in an open-ended investment company MOST LIKELY to be priced?
Single-pricing based on the value of the underlying shares
Investment trusts are normally:
Limited companies
