Chapter 8 Flashcards
Steady growth in ____ and ____ is a good sign of a firms viability.
Clients and Assets Under Management (AUM)
Favorable ownership structures exhibits some of the following qualities.
- The firm has a large majority or 100% employee ownership.
- Current ownership should have the authority to grant equity in the firm to attract and retain talented staff.
- Succession planning is in place to ensure a seamless transition if a principal of the company retires or passes away.
Superior investment management organizations should possess ____ checks and balances against high closing, front running and other conflicts of interest.
Internal
____ is the methodology by which the value is accrued to the fund.
Process
____ are the factors used and the way they are co-ordinated to value assets. They should be grounded in financial or economic theory.
Process elements
Whatever process is used, mutual fund investors should favour those firms that emphasize a ____ to managing money.
Team-based approach
In the team based approach, an individual ____ have total decision making power, but the structure of the investment process is very team dependent.
May or may not
An investment approach that emphasizes a ____ decision making process is better in the context of succession planning and continuity.
team based
An investment ___is a coherent way of thinking about how markets work and how they might be incorrectly priced.
philosophy
The ___ philosophy can appear in 2 forms, passive screening or contrarian investing.
Value
In ____ the investment manager partitions the stock universe using fundemental value metrics such as P/B, P/E and P/S.
Passive screening
____ 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.
Contrarian investing
____ 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.
Growth investors
Proponents of ___ investing believe that strong gains in earnings or stock price will translate into stronger future gains in earnings or stock price.
momentum
____ is basically a value approach to buying earnings growth.
Growth at a reasonable price (GARP)
___ managers use a yardstick called a ___ ratio. This is P/E divided by earnings growth.
GARP
PEG
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.
Interest rate anticipation
___ is the study of style drift in a funds holdings or returns over time.
Style analysis
Which form of mutual fund can help minimize tax consequences?
Mutual fund corporation
This form of mutual fund allows you to move between asset classes without triggering a tax liability.
Mutual fund corporation (MFC)
Bonuses should be based on ____
Performance
