Pooled investments Flashcards
Pooled investment
Multiple investors contribute assets to be held and invested as a single group
Index securities actively or passively managed?
Passively
Pooled investments are pass through for tax purposes meaning
interest, dividends, gains and losses are passed to the individual investor
Pooled investment interest and dividends taxed how
ordinary income
Pooled investment capital gains taxed how
as capital gains
Open ended fund has what capital structure
variable
closed end funds have what capital structure
Fixed
How would shareholders of a closed end fund liquidate their shares?
Secondary market
What happens when you add or withdraw money from an open end fund
creates or eliminates shares
ETFS and open ended funds trade at what value?
NAV
Closed end funds trade at what value?
discount or premium to NAV depending on supply/demand of secondary market
ETFS open end or closed end
Closed end
Do ETFs sell at a discount or premium?
No bc institutions are able to exchange etf shares for individual securities and vice versa which keeps an etf on track with the index its tracking
ETFs are open to who and closed to who
Open to institutions but closed to individual investors
Advantage of ETF over open end mutual funds
- trade during day
-capital gains may be managed, not incurred by activity of other investors
-low cost due to operating cost
Disadvantages to etf over open end mutual fund
commission to buy or sell shares
UITs publicly traded?
No
UIT open or closed end
Closed but not publicly traded
Bond UIT would liquidate when vs stock UIT
Bond liquidates as securities mature, stock would liquidate at predetermined date
How does investor use UIT
hold basket of securities and collect income and principal through time until all principal has been returned
UITS active or passive?
Passive
Drawbacks to mutual funds
Charge fees
often have minimum investment
Index securities cost is what vs actively managed fund?
Lower
Hedge funds use what strategies
leverage, long, short, derivatives, domestic and international
Hedge funds are set up as what structure?
private investment partnership
Hedge funds open to what type of investor?
Accredited, high initial investment amount
Hedge funds are unregulated why
Because they only cater to sophisticated investors
Hedge fund liquid or illiquid?
Illiquid
Hedge funds got their name how
because they could hedge against market downturn with ability to short the market, now they use many different strategies
Limited partnership
two or more partners united to conduct business jointly to the extent of the amount of $ the partnership has invested
Limited partners liability limited to what
Only what they invested
General partner liability is what
NOT limited, can be sued personally
Do limited partner receive dividends?
No they have direct access to to flow of income and expenses
Managed account
held by private investor and managed by a professional specifically tailored to that investor
Difference between mutual fund and managed account
managed acct is tailored for you vs mutual fund is managed on behalf of many investors
Separately managed accounts
privately managed investment account opened thru brokerage or advisor that uses pooled money to buy individual assets. Investor directly owns the securities instead of shares of a mutual fund. Usually 100k or more
