Chapter 10: Alternative Investments Flashcards
Exchange-Traded Fund (ETF)
Basket of assets that are traded like securities
Index Fund
Type of mutual fund that is designed to track the performance of a specific index and the investor’s money is invested in the fund, not directly in the index
Inverse ETF
Offer returns that are opposite to the performance of a specific asset and employ various strategies and derivatives to move against the market’s underlying index
Leveraged ETF
Amplify returns of investments, where they track the securities of an underlying asset but the return of the index is leveraged by two or three
Exchange-Traded Notes (ETN)
Debt securities that track and underlying index of securities
What makes ETN’s different from ETF’s?
ETN’s do not own an underlying basket of assets, instead they are secured dept notes that are issued by a financial institution and promise to pay a return linked to a specific market index
Real Estate Investment Trusts (REIT)
Pool money from investors and earn a dividend through the trust’s ownership and operation of income-producing real estate buildings without having to buy/manage/finance any properties themselves
Mortgage/Debt REIT
Loan money to real estate owners either in the form of direct mortgages or by buying mortgage-backed securities that are sold to investors
Equity REIT
Involved in physical real estate and earn income through rents or the sale of properties
Hybrid REIT
Invest in both real estate properties and mortgages or mortgage-backed securities
REIT: Registered, Exchange-Listed, and Publicly Traded (Liquid)
Registered with the SEC, listed on the stock exchange, and can be publicly traded by investors on the stock market, considered liquid as investors can trade them at any time during market hours
REIT: Registered but Not Exchange Listed (Non-Traded)
Registered with SEC but not listed on stock exchange; considered non-traded because not exchange listed and are sold/bought through a broker/financial advisor
REIT: Unregistered, Offered Through a Private Placement (Illiquid)
Not registered with SEC and can only be bought/sold through private sale to a specific group of investors; considered illiquid because there is no specific market and potential buyers cannot be easily found
Limited Partnership
Consist of two or more partners (general and limited) who own a particular business entity
Limited Partnership: General Partner
Manages the business and is liable for the company’s financial obligations, including debts and litigation
