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overview Flashcards

1
Q

negative screening

A

the practice of excluding certain sectors or companies that deviate from accepted standards in such areas as human rights or environmental concerns

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2
Q

positive screening / best-in-class

A

identify companies or sectors that score most favorably
with regard to ESG-related risks and/or opportunities

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3
Q

thematic investment

A

Focus on opportunities presented by new technologies, changes in regulations, and economic cycles

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4
Q

impact investing

A

+ seek to targeted social / enviromental objectives with measurable return
+ method:
* engagement with company
* direct investment to the company

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5
Q

popular approach to segmenting the equity universe

A

+ Size: ( large/small/mid cap)
+ Style: value, growth, blend (core)
+ Geography: developed/ emerging / frontier markets
+ Economic activity: production - oriented, market - oriented

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6
Q

production-oriented

A

approach group of companies have
+ the same products. Eg: commercial airlines in transportation sector/ travel sector / leisure sector
+ same inputs in manufacturing process. Eg: coal company in materials/mining sector,

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7
Q

market-oriented

A

group of companies have:
+ the markets they serve
+ the way revenue is earned
+ the way customers use companies products

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8
Q

4 main global segment in equity universe by economic activity

A

(1) the Global Industry Classification Standard (GICS);
(2) the Industrial Classification Benchmark (ICB);
(3) the Thomson Reuters Business Classification (TRBC);
(4) the Russell Global Sectors Classification (RGS).

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9
Q

2 main portion of dividend income

A

+ Special dividends
+ Optional stock dividends

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10
Q

securities lending income

A

involve securities the seller does not own

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11
Q

ancillary investment strategies

A

include
+ dividend captue
+ selling (writing) options

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12
Q

dividend capture

A

Step 1: purchase stock before ex-dividend dates
Step 2: hold stock through ex-dividend dates to earn the right to receive dividend
Step 3: sell the stock

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13
Q

administration fees

A

processing of corporate action:
+ custody fees: phi luu ky
+ depository fees:
+ registration fees

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14
Q

marketing & distribution cost

A

6 costs:
+ costs of employing mkting, sales, client servicing staff
+ advertising costs
+ sponsorship costs
+ producing, distributing brochure, communication to customer
+ Flatform fee
+ Sales commission

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15
Q

trading costs

A

include 3 costs:
+ Bid-offer spread
+ market impact
+ delay costs

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16
Q

market impact

A

the effect of trade on transaction prices

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17
Q

Delay costs (definition, cause)

A

inability to complete desire trade because:
+ order size
+ lack of market liquidity

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18
Q

shareholder engagement

A

+ refer to investor/manager interacting with companies and impact the stock price.
+Benefit: improve company governance
+ Action: participating in calls with company, vote in general meeting

19
Q

free rider problem

A

Investors who did not participate in shareholder
engagement benefitted from improved performance but without the costs necessary
for engagement

20
Q

segment by style

A

(1) growth
(2) value
(3) Core (mix)

21
Q

Advantage of segmenting by size and style include

A

(1) address client investment considerations in terms of
risk and return characteristics
(2) diversification benefits
(3) construct relevant benchmarks for funds that invest in a specific size/style category
(4) The ability to analyze how company characteristics change over time.

22
Q

Advantage of segmenting by size and style include

A

the categories are not stable over time

23
Q

segment by geography

A

(1) Developed markets
(2) Emerging markets
(3) Frontier markets

24
Q

advantage of segment by geography

A

better understand how to diversify across international markets.

25
2 disadvantage of segment by geography
(1) currency risk (2) overestimation of the diversification (Eg: MNC, ..)
26
segment by economic activity
Product oriented Market oriented
27
GICS
+ Global Industry Classification standard + market-oriented approach
28
ICB - TRBC - RGS
production-oriented approach
29
advantage and disadvantage of segment by economic activity
(1) Advantage + allows portfolio managers to analyze, compare, and construct performance benchmarks based on specific sector/industries. + diversification benefits. (2) Disadvantage + some companies, especially larger may have business operations that are not easily assigned to one speciassigned to one specification
30
type of dividend income
(1) Special dividends (2) Optional stock dividends
31
rebate rate
Related to repo, the rate back to the borrower
32
ad-valorem fee
management fee (%AUM)
33
custody fee
phi luu ky
34
Depository fees
so du toi thieu can duy tri
35
advantage of share holder engagement
(1) will have more information about companies or the sectors in which companies operate (2) improved the value of his portfolio (3) also have an interest in the process and outcomes of shareholder engagement (4) non-financial interests, such as ESG considerations, may also benefit from shareholder engagement.
36
disadvantage of share holder engagement
(1) time consuming and can be costly for both shareholders and companies (2) pressure on company management to meet near-term share price or earnings targets could be made at the expense of long-term corporate decisions (3) result in selective disclosure of important information to a certain subset of shareholders, which could lead to a breach of insider trading rules while in possession of specific, material, non-public information about a company (4) conflicts of interest can result for a company
37
reputation risk
from the potential violation of rules, regulations, client agreements, or ethical principles
38
key person
relevant for active managers if the success of an investment manager’s firm is dependent on one or a few individuals (“star managers”) who may potentially
39
Benefit of shareholder engagement
(1) Company: + can assist in developing a more effective corporate governance culture. (2) Investors: + will have more information about companies or the sectors in which companies operate + some investors could benefit from the shareholder engagement of others under the so-called “free rider problem.” + non-financial interests, such as ESG considerations
40
advantages & disadvantages of segmentation by size/style + Size: marge - mid - small + Style: value - core - growth
Advantages: (1) can construct portfolio that reflects desired risk, return, and income in a relatively STRAIGHTFORWARD and MANAGERABLE way (2) given the BROAD RANGE of companies within each segment, across economic sectors or industries (3) can construct PERFORMANCE BENCHMARK for specific size/style segments Disadvantages: (1) the categories may CHANGE OVER TIME and may be defined DIFFERENT AMONG INVESTOR
41
advantages & disadvantages of segmentation by size/style
Advantages: (1) useful to equity investors who have considerable exposure to their domestic market and want to diversify by investing in global equities Disavantages: (1) investing in a specific market may provide lower-than-expected exposure to that market (2) potential currency risk
42
advantages & disadvantages of segmentation by Economic Activity
Advantages: (1) enables equity portfolio managers to construct performance benchmarks for specific sectors or industries. (2) obtain better industry representation (diversification) by segmenting their equity universe according to economic activity Disadvantages: the business activities of companies—particularly large ones—may include more than one industry or sub-industry
43
the reason to consider passive/active
(1) Confidence to Outperform (2) Client Preference (3) Suitable Benchmark (4) Client-Specific Mandates (5) Risks/Costs of Active Management (6) Taxes
44
local richness/ cheapness
are deviations of individual maturity segments from the fitted yield curve, which was obtained using a curve estimation technique

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