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Leading with Finance > 3.1.1 Capital Markets > Flashcards

3.1.1 Capital Markets Flashcards

Leading with Finance Module 3.1.1 (68 cards)

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1
Q

What are institutional investors?

A

Large organizations that manage and allocate capital on behalf of their clients.

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2
Q

Name a key role of institutional investors in financial markets.

A

Influencing stock prices, providing liquidity, and shaping corporate strategies.

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3
Q

What is a Pension Fund?

A

Manages retirement savings for individuals and invests in a diversified portfolio of stocks, bonds, real estate, and private equity.

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4
Q

Provide an example of a Pension Fund.

A

CalPERS (California Public Employees’ Retirement System)

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5
Q

What do Mutual Funds do?

A

Pool money from retail and institutional investors to invest in various asset classes based on a specific investment strategy.

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6
Q

Give an example of a Mutual Fund.

A

Vanguard Total Stock Market Index Fund

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7
Q

What are Hedge Funds known for?

A

Using advanced investment strategies (long/short positions, leverage, derivatives) to maximize returns.

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8
Q

List two examples of Hedge Funds.

A
  • Bridgewater Associates
  • Citadel
  • Renaissance Technologies
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9
Q

Define Sovereign Wealth Funds (SWFs).

A

Government-owned investment funds that manage a nation’s surplus wealth.

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10
Q

Provide two examples of Sovereign Wealth Funds.

A
  • Norwegian Government Pension Fund Global
  • Abu Dhabi Investment Authority
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11
Q

What role do Insurance Companies play in investments?

A

Invest premiums collected from policyholders into bonds, stocks, and other assets.

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12
Q

List two examples of Insurance Companies.

A
  • Prudential Financial
  • Allianz
  • MetLife
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13
Q

What is the purpose of Endowments & Foundations?

A

Manage large pools of capital for universities, charities, and nonprofits, focusing on long-term growth.

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14
Q

Give an example of an Endowment or Foundation.

A

Harvard University Endowment

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15
Q

What do Private Equity & Venture Capital Firms do?

A

Private equity firms invest in mature companies, while venture capital firms invest in startups.

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16
Q

Provide examples of a Private Equity firm and a Venture Capital firm.

A
  • Blackstone (Private Equity)
  • Sequoia Capital (Venture Capital)
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17
Q

What services do Investment Banks & Asset Management Firms provide?

A

Investment advisory, capital allocation, and risk management services.

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18
Q

Name two examples of Investment Banks or Asset Management Firms.

A
  • Goldman Sachs
  • BlackRock
  • JPMorgan Asset Management
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19
Q

What are Family Offices?

A

Manage wealth for ultra-high-net-worth individuals (UHNWIs).

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20
Q

Give an example of a Family Office.

A

The Rockefeller Family Office

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21
Q

Do Credit Unions & Commercial Banks invest in markets?

A

True

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22
Q

Provide examples of Credit Unions or Commercial Banks.

A
  • Wells Fargo
  • Citibank
  • Credit Suisse
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23
Q

What does the term ‘buy side’ refer to in financial markets?

A

The buy side refers to institutional investors who purchase securities and assets for their own accounts or on behalf of clients.

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24
Q

Name one example of a mutual fund company.

A

Fidelity or Vanguard.

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25
What is the typical asset size managed by companies like Fidelity?
Mutual funds that exceed over a trillion dollars.
26
What are pension funds primarily used for?
Investing retirement assets.
27
Give an example of a large pension fund.
CalPERS (California Public Employees' Retirement System).
28
What types of organizations are considered foundations and endowment funds?
Harvard University, Stanford University, and the Gates Foundation.
29
What are sovereign wealth funds?
Funds that represent countries and invest large pools of capital on behalf of their citizens.
30
Provide an example of a country with a significant sovereign wealth fund.
Norway.
31
What is a key characteristic of hedge funds?
They are increasingly becoming dominant actors in capital markets.
32
What is a critical difference between mutual funds and hedge funds?
Their approach to risk management.
33
Fill in the blank: The _______ typically represents the retirement assets of workers in specific states and cities.
pension funds
34
True or False: Hedge funds had a significant role in capital markets 30 to 40 years ago.
False.
35
What important development in capital markets has occurred over the last 30 years?
The rise of foundations and endowment funds as dominant players.
36
What represents the retirement assets of California public employees?
CalPERS.
37
What is the relationship between natural resources and sovereign wealth funds?
Countries with large natural resources invest the wealth generated on behalf of their citizens.
38
What is the purpose of endowment funds?
To invest for the benefit of the underlying foundations.
39
What are the five most important types of institutional investors?
1. Pension Funds 2. Mutual Funds 3. Hedge Funds 4. Sovereign Wealth Funds (SWFs) 5. Insurance Companies ## Footnote These types control large amounts of capital and significantly influence financial markets.
40
What is the primary function of Pension Funds?
Manage retirement savings and invest in a mix of stocks, bonds, and alternative assets to provide financial security for retirees.
41
Give an example of a Pension Fund.
CalPERS (California Public Employees’ Retirement System) ## Footnote Another example is the Canada Pension Plan Investment Board (CPPIB).
42
What do Mutual Funds do?
Pool money from retail and institutional investors to invest in a diversified portfolio based on an investment strategy.
43
Give an example of a Mutual Fund.
Vanguard Total Stock Market Index Fund ## Footnote Another example is Fidelity Investments.
44
What distinguishes Hedge Funds from other types of funds?
Use aggressive investment strategies (short selling, leverage, derivatives) to generate high returns.
45
Give an example of a Hedge Fund.
Bridgewater Associates ## Footnote Other examples include Citadel and Renaissance Technologies.
46
What are Sovereign Wealth Funds (SWFs)?
Government-owned funds that invest a country’s surplus reserves in global markets to generate long-term wealth.
47
Give an example of a Sovereign Wealth Fund.
Norwegian Government Pension Fund Global ## Footnote Another example is the Abu Dhabi Investment Authority.
48
What is the role of Insurance Companies in the context of institutional investing?
Invest premiums collected from policyholders into low-risk assets (bonds, real estate, and equities) to ensure long-term solvency.
49
Give an example of an Insurance Company.
Prudential Financial ## Footnote Other examples include Allianz and MetLife.
50
What is a hedge fund?
A pooled investment fund that employs advanced investment strategies to generate high returns for its investors
51
Who is typically eligible to invest in hedge funds?
High-net-worth individuals (HNWIs), institutional investors, and accredited investors
52
What is the primary goal of hedge funds?
To generate alpha (excess returns over the market)
53
What are the key characteristics of hedge funds?
* Exclusivity * Aggressive Strategies * Less Regulation * High Fees (2 & 20 Model) * Low Liquidity
54
What is the typical fee structure for hedge funds?
2% management fee and 20% performance fee
55
What does low liquidity in hedge funds mean?
Investors often face lock-up periods, meaning they cannot withdraw their money immediately
56
What is a common hedge fund strategy that involves buying undervalued stocks?
Long/Short Equity
57
What does the Global Macro strategy focus on?
Investing based on macroeconomic trends, such as interest rates, inflation, or geopolitical events
58
What type of hedge fund strategy is Event-Driven?
Trading based on corporate events like mergers, acquisitions, bankruptcies, or spin-offs
59
What is the purpose of Arbitrage in hedge fund strategies?
Exploiting price differences between similar financial instruments
60
What does Quantitative Trading involve?
Using algorithms and big data to execute trades automatically
61
Name a famous hedge fund that focuses on global macro investing.
Bridgewater Associates (Ray Dalio)
62
Which hedge fund is known for using quantitative models and algorithms?
Renaissance Technologies (Jim Simons)
63
What is Citadel known for in the hedge fund industry?
A multi-strategy hedge fund covering equities, fixed income, and commodities
64
How do hedge funds differ from mutual funds in terms of regulation?
Hedge funds are lightly regulated while mutual funds are heavily regulated
65
What type of investors do mutual funds typically cater to?
Retail and institutional investors
66
What are the liquidity differences between hedge funds and mutual funds?
Hedge funds have lock-up periods while mutual funds offer daily liquidity
67
What is the typical fee structure for mutual funds?
Typically 1% or lower
68
Why do investors choose hedge funds?
* Potential for higher returns than traditional investment funds * Ability to profit in both rising and falling markets * Diversification through non-traditional assets and strategies

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