Various- Revision Flashcards
Why would a fund hold increased levels of cash (5)
Effects of holding too much cash (4)
- Inflows into fund
- Manager unable to make new investments
- Cover redemptions
- Just about to purchase /sell property (REIT)
- Income received
Too much cash:
- Drag on performance
- reduces risk/protects ion falling market
- Dilutes yield
- Reduce risk of forced sales
What is a Dilution levy
- increase of cost of buying and selling shares as a result of high levels of buying and selling. Protects value of existing investors holdings (only used with single priced funds.
What fees are included in an OCF figure (6)
What fees not included in OCF (5)
- Management / Annual Management charge
- Adminstration fee /secretarial/director/insurance
- Marketing
- Audit/tax compliance fees
- Registration / Regulatory fees
- Custody/depositary/trustee fees
- auditor and legal fees
Not included: (one offs)
- Transaction fees/initial charge/spread/stamp duty
- Performance fees
- One off legal fees
- Interest/gearing costs
- Adviser charge
- platform fee
- Entry charge
- broker charge
- POTM levy
- SDRT
- switching charge
Eight considerations when deciding to invest in ETFs or OEICS
- Charges
- Tracking error / benchmark
- STandard deviation / risk
- Dealing frequency
- Alpha/ stock picking/performance
- duplication /concentration risk
- dividends
- Mandate/style/passive/active
- counterparty risk
Value Investor
- Invests for long term
- In undervalued stocks/out of favour
- prices less than NAV
- Contrarian
- Buy and hold /low turnover
- limited downside
Six factors to affect price of a share
- Investor sentiment
- Market volatility
- Takeover
- unexpected cut in Dividends
- Change in management
- Unexpected news
- analysts
- Script issues
When does CGT have to be paid by. On sale of B2L
When does stamp duty become payable
Mortgage Int relief ?
- 30 days after completion
- SDLT - 14 days
- 20% tax reducer
Commercial property
- Lease
- Maintenance
- 5 minimum, maybe 10 years plus ie long tenancy
- Tenant responsible for upkeep etc
Stamp Duty Reserve tax
What’s exempt
PTM Levy
- 0.5% Electronic to nearest penny. Paper to nearest £5
- Exempt: Gilts, ETF, Unit Trust, OEIC, AIM, Divorce, probate
Panel for takeovers and mergers levy -£10k. £1 flat charge over £10k
diversification rules retail collectives UCITS/OEIC
- Minimum permissible holdings
- 16 Holdings min
- 4 x 10%
- 12 x 5%
10% in unlisted securities
What is capacity for loss
- Non financial factors that could affect ATR (6)
- ATR for pension may be higher (5)
- ability to withstand and negative investment event without having detrimental effect on standard of living
- Previous experience
- Time horizon
- dependants
- Objectives/ ethical view
- Framing
- Society/collective mood/political ‘economic environment
ATR pension may be higher
- longer term
- impact of short term volatility less
- Not accessible til 55
- Effect of tax relief/ employer contributions
- consideration for capacity for loss different
Reasons to use DFM (5)
Potential risks of using DFM (8)
- Active management /Alpha
- wider range of assets/funds
- time markets/speed of transaction
- Bespoke
Influence asset allocation - Tax planning service
Risks of using DFM:
- FSCS limit exceeded / not available
- DFM uses unsuitable assets
- Duplication with non DFM portfolio
- DFM acts outside mandate/ deviation from benchmark
- Regulatory issues
- Overtrading
- Higher costs
- service may include tax liability
- Underperformance, negative alpha/does not add value
Risks in investing in high yielding alternative investment
- Liquidity risk
- Accessability risk
- interest rate risk/gearing risk
- Valuation risk
- Diversification/correlation risk
- default credit risk
Investment considerations that’s could impact on objectives approaching retirement
- Change in health /life expectancy
- Change in taxation
- change in inflation
- Market volatility
- sustainability of income
- Other savings
Investment Management Services - 3 Different options
- Bespoke segregated portfolio (discretionary or advised).
Offered by stockbroker or private client investment manager - Managed portfolios - Structured to match risk profiles. Approach specific to them
- Unitised version of model portfolios
Expenses and fees that a client may be subject to - DFM
- AMC and any ongoing charges
- dealing commissions/ bid/offer spread
- Panel on Takeovers and Mergers (POTM levy)
- SDRT
- Initial set up fees/exit fees
- one off valuation charges
VAT - Custodian, platform fees, wrapper fees
Sequencing risk
- Impact of volatility
-on order and timing of withdrawals - sustainability of future income
- long term impact on capital value
- Greater in early years
Danger that timing of withdrawals form an account will damage overall return
MAin objectives of rebalancing (6)
Main issues anIFA considers when rebalancing portfolio set up for income
- realign portfolio to original asset allocation/weighting
- match ATR
- capacity for loss
- review individual funds/correct any style drift
- invest cash
- adjust portfolio to deal with any changes in circumstances /needs/objectives
Issues:
- Trading costs
- WHETHER to alter benchmark
- tax liabilities
- Legislation issues
- rebalancing automatic or manual
- frequency
- Will existing income be affected
- Liquidity
- market timing
- ongoing suitability of funds/asset allocation
What can be held in Innovative ISA
- peer to Peer
- Cash
- Debt based securities/bonds/loans to companies
PIBS & PSBs
Difference
- PIBS : Building Society Permanent Interest Bearing Security
- PSBs: demutualised now Bank Perpetual subordinated Bonds
- Undated ie permanent …or perpetual ongoing
- Sensitive to interest rates
- Protection - no FSCS
-Rank behind all creditors and depositors- credit rating is important - normally relative high coupon to compensate
- Interest payments - non cumulative
- Income gross but taxable
= No CGT - high minimum investment amounts
Potential Drawbacks of Hedge Funds (7)
- High charges
- complex
- Lack of transparency re investment strategy
- Often based offshore /low regulation
- high risk/geared
- high minimum investment level;
- may not be liquid
- lack of information/updates
- Reliance on fund manager quality
FTSE LISTING REQUIREMENT
- Trading history - 3 years
- Min 25% shares must be offered to market
- Minimum market capitalisation required
- IFRS accounting practice required - International Financial Reporting standards
AIM - No trading history requirement
- No minimum shares offered
- Broader range of accounting standards
- NO. MINIMUM MARKET CAP
Reason to make Bonus /Scrip issue
- bring share price down to a moire marketable level
- Restructure Comanche reserves / increase share capital
- Alternative to pay dividend
Risks associated with B2L( 5)
- Interest rate
- Physical damage
- Market risk
- property value falling
- Liquidity
- tenant/income risk
- Void periods
Risks of peer to peer lending(5)
- No FSCS
- Lack of liquidity
- Credit risk/default risk
- Counter part risk
- new industry so no way of telling how would survive economic downturn
Technical Analysis used to m are share purchase decisions
- Excludes Fundamental analysis
- Uses charts of past share price
- identifies trends/patterns that predict future performance
- Assumes that are repeated
