Creating New Portfolio Management Mandates

Question 1

nine steps in assessing and developing new investment products

Answer 1

1. Identifying market opportunities
2. Determining portfolio management skills, internal and external
3. Assessing the market
4. Determining legal and regulatory restrictions
5. Developing a marketing and distribution strategy
6. Preparing a financial forecast
7. Obtaining approval from the investment management firm’s new product development committee
8. Developing project management timelines
9. Launching the product

Question 2

Two Reasons PM Staff promotes new product:

Answer 2

• Firm has competitive advantage

* Emerging or underdeveloped market sector opportunity identified

Question 3

benefits of being first to market

Answer 3

Increase in AUM
Market share leadership
Firm seen as innovator

Question 4

Capital Market accessibility is part of which step?

Answer 4

Assessing the Market

Question 5

Which investment product is the most regulated in Canada?

Answer 5

mutual funds are the most regulated of all Canadian investment products

Question 6

This timing to obtain prospectus approval is dependent on the following three major factors

Answer 6

• The Time of Year
• A “Clean” Prospectus
• Exemptions

Question 7

5 apects to take into account for preparing a Financial forecast

Answer 7

• Sales volumes
• Distributor compensation
• Seed capital requirements
• Third-party expenses
• Investment management fees

Question 8

How much does a new fund need in seed funding?

Answer 8

$150,000

Question 9

7 third party services

Answer 9

• Custodial/safekeeping
• Trustee
• Unitholder record-keeping
• Fund administrator
• Audit
• Legal
• Fund director fees

Question 10

Three imputs for Pro Forma Finanical Projection

Answer 10

1. AUM (revenue)
2. Fees charged to investors (revenue)
3. Fund Expenses

Question 11

What is the project management committee’s first task?

Answer 11

to develop a timeline

Question 12

3 aspects in a typical distribution agreement

Answer 12

• Fees and commission schedules
• Sales and marketing support
• Advertising budgets

Question 13

What is a Pre-Operational Audit?

Answer 13

An audit of the fund manager’s systems as well as all third party service provider he uses. A dummy sale is run to test all systems

Question 14

Sales and Marketing Materials are prepared for two audiences:

Answer 14

• Distributors

* Individual Investors

Question 15

3 most popular sector-specific funds

Answer 15

• Government securities
• Corporate securities (only investment-grade)
• Specialty securities (ABS, MBS)

Question 16

What is an investment-grade credit quality rating?

Answer 16

the issuers of the fixed income securities have, at a minimum, a BBB credit quality rating from at least one of the popular fixed income credit rating agencies.

Question 17

For a typical Canadian balanced fund, the target asset mix policy is as follows

Answer 17

• 60% Canadian equities
• 30% Canadian bonds
• 10% Canadian short-term money market investments

Question 18

Product market Pull vs Push

Answer 18

• Pull is when idea originated from investors / distributors

* Push is when idea come from Portfolio Managers

Question 19

primary role of a new product development committee?

Answer 19

assess new investment fund or product opportunities

Question 20

2 types of Audience for which investment firms use internal portfolio managers?

Answer 20

• institutional

* high-net-worth

Question 21

micro-capitalization stocks are companies that tend to have a market capitalization between ___ and ___

Answer 21

$50 million $300 million