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pmt > K, L, M, N, O, P > Flashcards

K, L, M, N, O, P Flashcards

1
Q

“Know Your Client” (KYC) rule

A

An industry best practice that stipulates an
investment professional should give
appropriate cautionary advice to and
perform appropriate action for a client
based on the client’s investment objectives
and needs.

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2
Q

Laddered portfolio

A

In a laddered portfolio, bonds are initially
purchased with each maturity up to 30
years in equal proportions

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3
Q

Late trading

A

An illegal activity where a mutual fund
company allows a trader to enter an order,
either to purchase or sell, after the
established cut-off time.

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4
Q

Leverage

A

The use of borrowed money to extend the

buying power of a fund.

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5
Q

Limited partnership (LP)

A

A common form of business organization
with one or more general partners who
manage the business and assume legal debts
and obligations, and one or more limited
partners who are liable only to the extent of
their investment.

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6
Q

Liquidity date

A

Pre-specified times of the year when
investors may be allowed to redeem units in
an alternative investment fund.

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7
Q

Lockup

A

The time period that initial investments
cannot be redeemed from an alternative
investment fund or product.

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8
Q

Long–short investing

A 
A portfolio construction technique 
designed to take greater advantage of 
information within the equity market. 
Purchases of stocks are offset dollar for 
dollar with short sales of other stocks
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9
Q

Macaulay duration

A

The weighted average maturity of a bond
where the weights are the relative
discounted cash flows in each period.

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10
Q

Macaulay duration formula

A

A formula devised by Frederick Macaulay
in 1938 to deal with the valuation and time
pattern of duration on bond:

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11
Q

Managed futures fund

A

A fund that invests in listed fi nancial and
commodity futures markets and currency
markets around the world

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12
Q

Management expense ratio (MER)

A

The amount charged to a fund by the fund
manager before any returns are paid out to
investors. The MER includes the fund
manager’s compensation and other expenses
associated with operating the fund.

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13
Q

Management styles

A

The term used to describe an equity
portfolio manager’s investment strategy;
generally falls into two categories: active or
passive.

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14
Q

Manufacturer (of a PPN)

A

An entity that helps the issuer of a PPN
design the notes and market them to
investors and distributors.

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15
Q

Market depth

A

The number of shares available at the bid

price and offer price.

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16
Q

Market price

A

The price that a security will fetch on open
bidding in the market. Depending on the
type of security, market prices can be
interpreted in different ways.

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17
Q

Market timing

A

Buying or selling global securities after
global markets have closed (but still remain
open in North America because of time
zone differences) to take advantage of
information that will affect the securities
when the markets reopen the next day.

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18
Q

Market–neutral investing

A

See Long–short investing

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19
Q

Means values

A

The actions taken in the present to achieve

a future goal.

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20
Q

Micro-cap stocks

A

Companies that tend to have a market
capitalization between $50 million and
$300 million.

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21
Q

Minimum investment exemption

A 
Allows the sale of securities without a 
prospectus to investors who make a 
prescribed minimum investment; NI 
45-106 sets this minimum at $150,000 
across all jurisdictions in Canada.
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22
Q

Modern portfolio theory (MPT)

A

A theory developed by Harry Markowitz
that contends that diversification of a
portfolio across different asset classes with
low or negative correlation characteristics
will minimize risk.

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23
Q

Mortgage-backed securities

MBSs

A

Portfolios of mortgages assembled and sold
in tranches to increase mortgage capital for
lenders and offer secure higher-yielding
medium-term investments, comparable to
government bonds

24
Q

National instruments

A

A series of regulations developed by the
CSA that are applicable across the country
and serve to harmonize rules and
regulations in each jurisdiction

25
Q

Net asset value (NAV)

A

The market value of the fund’s units or

shares on a particular date.

26
Q

New product development

committee

A

A committee put together to vet and assess
new investment fund or product
opportunities for the investment
management firm.

27
Q

NI 81-102

A

The National Instrument that applies to
mutual funds in Canada and outlines the
permitted derivative activities that these
funds can undertake.

28
Q

NI 81-104

A

The National Instrument introduced in
2002 that permits a broader use of
derivatives by funds that fall into the
definition of commodity pools.

29
Q

Non-exempt investors

A

Non-exempt investors

30
Q

Offering memorandum exemption

A

An exemption that waives the requirement
for the security or fund to be distributed
with a prospectus.

31
Q 
Offi ce of the Superintendent of 
Financial Institutions (OSFI)
A

An independent agency of the Government
of Canada that supervises, monitors and
regulates the investment industry.

32
Q

Ontario Securities Commission

OSC

A

An example of a Canadian securities
regulator. The OSC’s mandate, as set by the
Government of Ontario, is “to provide
protection to investors from unfair,
improper or fraudulent practices and to
foster fair and efficient capital markets and
confidence in capital markets.”

33
Q

Passive bond management

A

A bond management style where no
attempt is made to predict the direction or
magnitude of interest rates, thereby
minimizing the effects of interest-rate risk
on a bond portfolio.

34
Q

Passive portfolio management

A

A portfolio management style that is
consistent with the view that securities
markets are efficient, that is, that securities
prices at all times reflect all relevant
information concerning expected return
and risk.

35
Q

Peer investment manager

performance surveys

A

Surveys that are produced by a number of
the larger pension consulting firms and
contain sufficient information to evaluate
the effectiveness and competitiveness of an
individual firm’s investment process.

36
Q

Pension consultants

A

Pension consultants

37
Q

Performance attribution

A

Evaluating an investment manager’s
performance by attributing the success or
failure of the portfolio to specific decisions
the manager made.

38
Q

Performance benchmark

A

A benchmark against which a new
investment product will be measured to
explain the fund’s performance.

39
Q

Personal Information Protection
and Electronic Documents Act
(PIPEDA)

A

A federal law that regulates how businesses,
including investment management fi rms,
handle and secure personal and private
data

40
Q

Plan sponsor

A

In the case of a private pension plan, the
employer offering the pension plan to its
employees.

41
Q

Pooled fund

A

An open-ended trust in which investors
contribute funds that are then invested, or
managed, by the institutional investment
manager

42
Q

Pooled investment vehicles

A

Portfolios where investors place their money
to achieve diversification at lower costs;
some examples are mutual funds, hedge
funds and private investment partnerships.

43
Q

Portable alpha

A

The process of using derivatives or short
selling to separate the alpha and beta return
decisions and to apply the alpha to
portfolios of other asset classes.

44
Q

Portfolio accounting information

A 
Information provided to an institutional 
investor in the portfolio management 
report that includes detailed portfolio 
holdings, a report on all security 
transactions and an income report
45
Q

Portfolio management information

A 
Information provided to an institutional 
investor in an investment management 
fi rm’s quarterly report to clients that 
includes return data, holdings data, 
attribution analysis and market 
commentary
46
Q

Portfolio management report

A

The document of record that an
institutional client refers to for information
on a firm’s holdings and performance.

47
Q

Portfolio manager

A

An individual, or a team of individuals,
who advises clients on investments
appropriate to the clients’ individual
circumstances and investment objectives;
the portfolio manager is also responsible for
making the day-to-day investment
management decisions affecting the
portfolios for which he or she is responsible

48
Q

Portfolio turnover

A

A way to measure the degree or amount of
active management, specifically trading
activity; calculated by dividing the annual
market value of securities trades by the
market value of the portfolio.

49
Q

Pre-operational audit

A

An audit of all systems and processes before
the launch of a new investment fund, to
ensure that all operational aspects associated
with the sale and management of the new
fund are functioning properly at industry
standards.

50
Q

Pre-trade compliance testing

A

A process to ensure that all security trades
are compliant with all security regulations
pertaining to both capital market conduct
and the particular fund, as well as all of the
investment guidelines and restrictions that
are agreed upon with the investors prior to
the execution of the trade

51
Q

Prime brokerage structures

A

Structures that allow managers to establish

a stock loan account with a broker.

52
Q

Principal-protected notes (PPNs)

A

A debt instrument where the principal is
protected by a guarantee from the issuer of
the note.

53
Q

Private equity

A

Equity investments not actively traded on
public markets; classified as alternative
investments.

54
Q

Pro-forma fi nancial projection

A 
Financial projections prepared for a new 
fund that include three key inputs or 
assumptions: assets under management 
(revenue); fees charged to investors 
(revenue); all fees and expenses to be 
charged to the fund.
55
Q

Project management committee

A

A committee that is responsible for all of
the steps and activities required to bring a
new product to market after it has been
approved by the new product development
committee.

56
Q

Provincial and territorial securities

commissions

A

The governing securities regulators in
Canada; they are charged with enforcing
and helping to frame the various securities
acts of the provinces

57
Q

Prudent man rule

A

Mandates acting as a thoughtful and careful
person would, given a particular set of
circumstances.

pmt (4 decks)

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