Lesson 5: Other Managed Products Flashcards
REIT
Real Estate Investment Trust
Need to distinguish between the 3 types:
- Equity REIT: owns RE, revenue from rent
- Mortgage REIT: Loans for RE, revenue from interest payments
- Hybrid REIT: in the name
REIT Taxation
If 75% of income is from RE, 75% of assets are in RE, and 90% of taxable income is distributed to shareholders, then only shareholder is taxed on the dividend
(ie no corporate income tax)
Need all 3!
Direct Participation Program (DPPs)
Think of this as an umbrella categorization of different businesses
- no corp taxation
- these are limited partners
C Corps
Larger corporations that do NOT pass through gains and losses to the investors, but they are double taxed
Master Limited Partnerships (MLPs)
primarily energy-related businesses (ie producing, processing, and transporting oil & gas)
Exchange traded, partnership taxation, limited liability, investment objective, risks
Hedge Fund
- flexible investment vehicles for financially sophisticated investors
- risky, unregistered, lack of liquidity, high minimum investments, high fees
Private Equity
- investment vehicles that make direct investments to fully or partially buy existing companies
- long term (5-10 years), lack of liquidity, may not be able to support debt, high min investments
Structured Products
Securities created by broker dealers that provide a return based on market performance (like an equity index) and limit downside exposure
Exchange Traded Notes (ETNs)
structured products consisting of a bond + derivative
so market exposure with downside protection
Municipal Fund Securities
(Local Gov Investment Pools: LGIP)
For all intents and purposes they are a mutual fund, but they’re issued by local govs for local govs
municipalities can invest their idle cash into an LGIP to earn a return
