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Investment And Portfolio Management > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

When investors decide to invest in a particular asset class such as equities there are two ways they can do it

A

Direct investment and indirect investment

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2
Q

It is when an individual personally buys shares in a company such as buying shares in apple the technology giant

A

Direct investment

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3
Q

It is when an individual buys a stake in an investment fund such as mutual fund that invest in the shares of a range of different types of companies perhaps including apple

A

Indirect investment

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4
Q

There is a range of funds available that pool the resources of a large number of investors to provide access to a range of investments. this pooled funds are known as

A

Collective investment schemes (CIS)

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5
Q

It is one that can create new shares in response to investor demand of cancel them when sold so that their capital can expand or contract

A

Open-ended fund

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6
Q

It has a fixed capital days so if an investor wants to buy shares they will do so on the stock exchange and buy them from another investor who wants to sell

A

Closed-ended fund

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7
Q

These are funds that are established in europe and marketed internationally are often labeled as

A

Undertakings for collective investment in transferable securities (UCITS) funds

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8
Q

It is seen as a measure of quality that makes them acceptable for sale in many countries in the middle east in asia

A

Ucits branding

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9
Q

It pull the resources of a large number of investors with the aim of pursuing a common investment objective

A

Investment funds

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10
Q

The pooling of funds brings a number of benefits including

A

Economies of scale
diversification

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11
Q

It refers to the fund managers approach to choosing investments and meeting the fonts objectives

A

Investment styles

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12
Q

It is seen in those types of investment funds that are often described as index tracker funds

A

Passive management

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13
Q

It involves constructing a portfolio and such a way that it will track or mimic the performance of a recognized index

A

Index tracking or indexation

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14
Q

It seeks to outperform a predetermined benchmark over a specified time period

A

Active management

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15
Q

It means that the manager focuses on economic in industry trends rather than the prospect of particular companies

A

Top-down

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16
Q

It means that the analysis of a company’s net assets, future profitability and cash flow and other company specific indicators is a priority

A

Bottom up

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17
Q

Range of investment styles

A

Growth investing
value investing
momentum investing
contrarian investing

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18
Q

Which is speaking the shares of companies with present opportunities to grow significantly in the long-term

A

Growth investing

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19
Q

Which is taking the shares of companies that are undervalued relative to their present and future profits or cash flows

A

Value investing

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20
Q

Which is speaking the shares whose share price is rising on the basis that this rise will continue

A

Momentum investing

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21
Q

The flipside of momentum investing which involves picking shares that are out of favor and may have hidden value

A

Contrarian investing

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22
Q

Index trackers and actively managed funds can be combined in what is known as

A

Core-satellite management

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23
Q

These are funds that combine elements of both traditional passive and active investing

A

Smart beta funds

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24
Q

Basic to outperform traditional passive strategies by targeting value-creating investment ideas such as finding bar games following a trend or seeking safety

A

smart beta funds

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25
Q

It is an investment fund that can issue and redeem shares at any time

A

Open-ended fund

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26
Q

the most well known type of US investment fund

A

mutual fund

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27
Q

most mutual fund shares are sold mainly through

A

brokers
banks
financial planners
insurance agents

28
Q

The price that an investor will pay to buy shares or received when they are redeem is based on the

A

NAV of the underlying portfolio

29
Q

Three main types of funds in european open-ended funds

A

SICAV
unit trusts
OEIC

30
Q

It refers to a series of EU regulations that were originally designed to facilitate the promotion of funds to retail investors across europe

A

UCITS

31
Q

Is one of the main centers for funds that are to be distributed to investors across european borders and globally

A

luxembourg

32
Q

An investment company with variable capital or in other words and open-ended investment company

A

SICAV - a Societe d’Investissement a Capital Variable

33
Q

Do not have a legal personality instead their structure is based on a contract between the scheme manager and the investors

A

FCP

34
Q

Is an investment fund that is established as a trust in which the trustee is the legal owner of the underlying assets in the unit holders are the beneficial owners

A

unit trust

35
Q

Unit trust are described as

A

dual priced

36
Q

The price the investor receives if they are selling

A

bid price

37
Q

The price the investor base is buying

A

offer price

38
Q

The difference between the bid price and offer price is

A

bid offer spread

39
Q

They are a form of icvc that is structured as a company with the investors holding shares

A

OEIC

40
Q

Refers to the use of the mid market prices of the underlying assets to produce a single price at which investors buy and sell

A

single pricing

41
Q

The capital of this is therefore fixed and does not expand or contract in the way that an open-ended funds capital does

A

closed ended funds

42
Q

The basic types of investment companies in the us

A

mutual fund
closed ended funds
unit investment trusts

43
Q

It is considered to be a security that cannot be sold within 7 days at the approximate price used by the font in determining nav

A

illiquid security

44
Q

It does not actively trade it’s investment portfolio instead it buys are relatively fixed portfolio of securities

A

UIT

45
Q

It is actually a company and not a trust, it will invest in a range of investments allowing its shareholders to diversify and lessen their risk

A

investment trust

46
Q

Such investment trust are commonly referred to as

A

split capital investment trusts

47
Q

These companies are allowed to borrow money on a long-term basis by taking out bank loans or issuing bonds

A

Investment trust

48
Q

These are well established in countries such as the us uk australia canada and france

A

Real estate investment trusts

49
Q

one of the main features of this is that they provide access to property returns without the previous disadvantage of double taxation

A

REITs

50
Q

it gives investors access to professional property investment and might provide them with new opportunities such as the ability to invest in commercial property

A

REITs

51
Q

the risk that the investment will not be able to be readily realized

A

liquidity risk

52
Q

is an investment fund usually designed to track q particular index

A

exchange traded fund

53
Q

a method of managing an investment portfolio that seeks to match the performance of a broad based market index

A

passive investment management

54
Q

is the traditional form of index replication and is the one favoured by the largest and long established ETF providers

A

physical replication

55
Q

three tracking methods of physical replication

A

full replication
stratified sampling
optimization

56
Q

this method requires each constituent of the index being tracked to be held in accordance with its index weighting

A

full replication

57
Q

this method requires a representative sample of securities from each sector of the index to be held

A

stratified sampling

58
Q

this method costs less than fully replicating the index tracked, but is statistically more complex

A

optimization

59
Q

involves the fund manager entering into a swap with a market counterparty to exchange the returns on the index for a payment

A

synthetic replication

60
Q

are reputed to be high risk and sought to eliminate or reduce market risk

A

hedge funds

61
Q

common aspects of hedge funds

A

structure
high investment entry levels
investment flexibility
gearing
liquidity
cost

62
Q

is medium to long term finance provided in return for an equity stake in potentially high growth companies

A

private equity

63
Q

it is invested in exchange for an stake in a company and as shareholders the investors returns are dependent on the growth and profitability of the business

A

private equity

64
Q

raise their capital from a variety of sources but mainly from large investing institutions

A

private equity firms

65
Q

are now usually structured in different ways from retail investment funds

A

private equity arrangements

Investment And Portfolio Management (6 decks)

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