Topic 4 - Funds Management Flashcards
What does this solve? (NAV)
Net Asset Value
- Investment companies pool assets of individual investors, but also need to divide claims to those assets among investors
How does a ‘unit investment trust’ work?
- Unit investment trusts are pools of money invested in a portfolio that is fixed for the life of the fund.
- Unmanaged
- Declined from $105 billion (1990) to $85 billion (2017)
What are the two types of ‘Managed Investment Companies’, and how do they operate?
Open-End
- Stand ready to redeem or issue shares at the NAV
- Priced at Net Asset Value (NAV)
Closed-End
- Do not redeem or issue shares
- Shares outstanding constant; investors cash out by selling to new investors
- Priced at premium or discount to NAV
What are the three types of Other Investment Organisations and how do they operate?
Coxxxxxxed Funds
RXEXS
Hexxe Funds
Commingled funds
- Partnerships of investors that pool funds
REITs
- Similar to a closed-end fund
- Equity versus mortgage trusts
Hedge funds
- Vehicles that allow private investors to pool assets to be invested by a fund manager
What is the more commonly used name for an ‘Open-end’ investment company?
Mutual Funds
Dominant investment company today
- Accounts for 87% of investment company assets
Assets under management (early 2018)
- U.S. – $18.7t
- Non-U.S. – $25t
True or False:
Mutual Funds can specialise in Money Markets, Equity, Sectors or Bonds.
Money market
- Invest in money market securities such as commercial paper, repurchase agreements, or CDs
Equity
- Invest primarily in stock
Sector
- Concentrate on a particular industry or country
Bond
- Specialize in the fixed-income sector
Index
- Tries to match the performance of a broad market index
International
- Global, international, regional, and emerging market
Balanced
- Designed to be candidates for an individual’s entire investment portfolio; hold both equities and fixed-income securities in relatively stable proportions
Asset allocation and flexible funds
- Hold both stocks and bonds
- Engaged in market timing; not designed to be low-risk
Calculate the below…
ETFs are offshoots of Mxxxal Fuxxs.
Mutual Funds
What are some advantages and disadvantages of ETFs?
Potential advantages
- Trade continuously like stocks
- Can be sold short or purchased on margin
- Cheaper than mutual funds
- Tax efficient
Potential disadvantages
- Prices can depart from NAV
- Must be purchased from a broker (for a fee)
What is included in a Prospectus?
- Statement of Investment Objectives
- Describes investment objectives and policies
- Description of fund’s investment adviser and portfolio manager
- Presents fees and costs
Chandelier
What is an SAI?
Statement of Additional Information
- Contains information about a mutual fund that may not be found in its original prospectus. The SAI is used to disclose more detailed information and updated financials that may not be included in the broader prospectus.
