Chapter 8

Question 0

Steady growth in ____ and ____ is a good sign of a firms viability.

Answer 0

Clients and Assets Under Management (AUM)

Question 1

Favorable ownership structures exhibits some of the following qualities.

Answer 1

1. The firm has a large majority or 100% employee ownership.
2. Current ownership should have the authority to grant equity in the firm to attract and retain talented staff.
3. Succession planning is in place to ensure a seamless transition if a principal of the company retires or passes away.

Question 2

Superior investment management organizations should possess ____ checks and balances against high closing, front running and other conflicts of interest.

Answer 2

Internal

Question 3

____ is the methodology by which the value is accrued to the fund.

Answer 3

Process

Question 4

____ are the factors used and the way they are co-ordinated to value assets. They should be grounded in financial or economic theory.

Answer 4

Process elements

Question 5

Whatever process is used, mutual fund investors should favour those firms that emphasize a ____ to managing money.

Answer 5

Team-based approach

Question 6

In the team based approach, an individual ____ have total decision making power, but the structure of the investment process is very team dependent.

Answer 6

May or may not

Question 7

An investment approach that emphasizes a ____ decision making process is better in the context of succession planning and continuity.

Answer 7

team based

Question 8

An investment ___is a coherent way of thinking about how markets work and how they might be incorrectly priced.

Answer 8

philosophy

Question 9

The ___ philosophy can appear in 2 forms, passive screening or contrarian investing.

Answer 9

Value

Question 10

In ____ the investment manager partitions the stock universe using fundemental value metrics such as P/B, P/E and P/S.

Answer 10

Passive screening

Question 11

____ seeks stocks that are out of favour. They are not necessarily motivated by low P/B or P/E. They want to buy companies other investors avoid because of poor past records or recent bad news.

Answer 11

Contrarian investing

Question 12

____ are more concerned about the future prospects of a firm than its present price. A firm might be trading for more than its intrinsic value.

Answer 12

Growth investors

Question 13

Proponents of ___ investing believe that strong gains in earnings or stock price will translate into stronger future gains in earnings or stock price.

Answer 13

momentum

Question 14

____ is basically a value approach to buying earnings growth.

Answer 14

Growth at a reasonable price (GARP)

Question 15

___ managers use a yardstick called a ___ ratio. This is P/E divided by earnings growth.

Answer 15

GARP

PEG

Question 16

A basic ____ strategy involves moving between long term government bonds and very short term Treasury bills based on a forecast of interest rates over a certain time horizon.

Answer 16

Interest rate anticipation

Question 17

___ is the study of style drift in a funds holdings or returns over time.

Answer 17

Style analysis

Question 18

Which form of mutual fund can help minimize tax consequences?

Answer 18

Mutual fund corporation

Question 19

This form of mutual fund allows you to move between asset classes without triggering a tax liability.

Answer 19

Mutual fund corporation (MFC)

Question 20

Bonuses should be based on ____

Answer 20

Performance