e describe mutual funds and compare them with other pooled investment products.

Question 1

Mutual Funds

Answer 1

Pooled investments

NAV = Total net assets / #shares

Open End: Buy, Sell at NAV. No-load: No upfront fees
Load: Upfront fees. Div inc may be reinvested

Closed-end:Active No new investments, no redemptions, trade like equity (ETF, OTC)
Market price differs from NAV due to S and D

Question 2

ETFs

Answer 2

Passive management

Sales are made in market not in the fund

NAV calculated at closing asset prices

Recieve Div inc as cash

Less cap. Gains liab. than open-end because investors buy and sell, they don’t require the open-end fund to do so

Question 3

SMA’s (seperately managed accounts)

Answer 3

A portfolio owned by a single investor who doesn’t share issues

Question 4

Hedge Funds

Answer 4

Limited to investors who have a minimum amount of wealth

Question 5

Buyout (private equity) and Venture Capital

Answer 5

Buy public companies turn them private (shares no longer trade) by using a leveraged buyout in order to reorg. firms to inc. CF, pay down its debt, Inc equity value, then sell to public in whole or parts.

Venture Capital Funds: To grow startups then sells as IPO’s

Question 6

Types of Mutual Funds

Answer 6

Money Market: ST debt, interest inc, low risk of changes in share value, NAV = $tied to currency

Bond Mutual: Fixed inc. investments

Stock Mutual: Index (passive: Portfolio returns match an index);(active: Managers select securities to beat an index: higher fees, higher turnover = higher T)