Other Investments

Question 1

List other investments

Answer 1

1. CiS
   *investment trust
   *unit trust
2. Derivative
   *forward
   *future
   *options
   *warrant
3. Overseas
4. Emerging markets
5. Cash on deposit
6. Money market
7. Fixed security
8. Index linked security
9. Equity
10. Property

Question 2

CIS defn

Answer 2

Vehicle for indirect investment allowing investors access to a wide spread of assets as well as specialised management expertise

Close- ended
And
Open ended

Question 3

CiS - close ended vs open-ended

Answer 3

Closed: once initial tranche of money is invested- fund is closed to new business. Units in fund don’t change
Open: manager allowed to create and cancel units based on investments and disinvestments

Question 4

Cis investment trust features

Answer 4

1. Investment objective
2. Stakeholders
3. Share price
4. Investor
5. Open/closed
6. Public org
7. Gearing allowed

Question 5

Cis - unit trust defn

Answer 5

Open ended cis investors can buy units in underlying pool of assets from trust manager

Investment medium set up as trust by management company under trust deed (life offices)

Question 6

Cis - unit trust vs investment trust

Answer 6

1. Volatility
   *closed more volatile
2. Tax treatments
3. Marketability
   *open more marketable
4. Buying
   *closed is discounr
5. Gearing
   *closed is allowed Gearing
6. Returns
   *closed has higher volatility thus higher return
7. Uncertainty
   *true level of NAV or share price unknown for closed
8. Range of assets
   *closed has larger range

Question 7

Advantage of cis

Answer 7

1. Expertise
2. Tax advantages
3. Divisible
4. Diversification
5. TRack return
6. Cost of management avoided
7. Marketability

Question 8

Disadvantages of cis

Answer 8

1. Marketability
2. Management charges
3. Tax disadvantages
4. Loss of control

Question 9

Overseas investment benefits

Answer 9

1. Diversification
2. Matching
3. Returns

Question 10

Overseas investment disadvantages

Answer 10

Drinker moth
Caterpillar

1. Delays
2. Mismatch
3. Currency
4. Accounting difference
5. Tax disadvantages
6. Expertise needed
7. Regulations poor
8. Political
9. Information missing
10. Liquidity
11. Language
12. Additional admin
13. Restrictions on assets

Question 11

How to get Indirect overseas exposure

Answer 11

1. Multinational based in home market
2. Cis
3. Derivative

Question 12

Emerging markets considerations

Answer 12

1. Valuation of market
2. Economic growth
3. Information
   4 restrictions
4. Language and communication
5. Currency
6. Regulations
7. Availability of opportunity
8. Marketability
9. Political