3. Non-Bank Financial Institutions

Question 1

1. What are managed funds and how do they operate? In your answer you should discuss the 4 different categories of risk and give examples of at least 2 types of manage funds.

Answer 1

A managed fund is an investment vehicle where the pooled savings of individuals and invested in specified assets. Offers individuals the means to purchase expensive assets
Managed funds are categorized bases on their risk and return profile
- Capital Guaranteed fund – low risk low return. Invests in cash deposits debentures, government securities
- Capital stable fund low risk and low return, however slightly higher compare to cap. Guaranteed funds. Invests in similar assets as cap. Guaranteed however will have a small proportion of domestic shares in asset base
- Balanced growth funds moderate risk and return. Invest in longer term income streams, and capital growth securities such as domestic and foreign equities
- Managed growth or capital growth funds – highest risk and return larger proportion of equity securities such as domestic and foreign equities

Question 2

Capital Guaranteed fund

Answer 2

low risk low return. Invests in cash deposits debentures, government securities

Question 3

Capital stable fund

Answer 3

low risk and low return, however slightly higher compare to cap. Guaranteed funds. Invests in similar assets as cap. Guaranteed however will have a small proportion of domestic shares in asset base

Question 4

Balanced growth funds

Answer 4

moderate risk and return. Invest in longer term income streams, and capital growth securities such as domestic and foreign equities

Question 5

Managed growth or capital growth funds

Answer 5

highest risk and return larger proportion of equity securities such as domestic and foreign equities

Question 6

What is the function of investment banks. In your answer, discuss the main sources and uses of funds, and off-balance sheet business.

Answer 6

Investment banks primarily provide OBS and advisory services to high net wealth and institutional clients
Some examples of OBS include underwriting debt or equity providing services associated with mergers and acquisitions, restructuring services and IPO
Sources of funds: securities issued in domestic and international money markets receive percentage based fees for OBS/advisory services
Use of funds short term lending to clients (generally limited); obs services

Question 7

Sources of funds of investment banks

Answer 7

securities issued in domestic and international money markets receive percentage based fees for OBS/advisory services

Question 8

Use of funds of investment banks

Answer 8

short term lending to clients (generally limited); obs services