Chapter 5 Flashcards
(31 cards)
Defines an investment company as being held in the business of holding and managing a portfolio of securities for its investors or that has at least 40% of its total assets held in the investment securities. Company must have at least 100,000 and net assets and a clearly defined investment objective. Investment company with 100 investors or more must register with the SEC.
Investment company act of 1940 definition of an investment company
Established or organized under a trust and denture. Operated by board of trustees who establish its investment objectives. A fixed portfolio. Has no manager, investors do not pay management fee. Units referred to as shares of beneficial interest. Redeemable with the issue were. Has a predetermined end date
Unit investment trust (UIT)
Organized as a corporation operates under a direction of board of directors issues shares of undivided interest to investors. Managed by a professional investment advisor.
Management investment company or management company
An open-end fund is also referred to as
Mutual fund
I functions of the Board of Directors
Establish investment policy. Appoint officers to manage operations. Oversee professionals hired by the fun. Established a villain in capital gains policy. Approved 12 be one piece.
Primary responsibility of the board of directors
Protect shareholder interest.
Function of the investment advisor or fund manager
Manages the funds investment portfolio providing investment advice maintaining appropriate diversification. Managing day today trading. Research and analysis of individual securities.
Contract for investment advisor is for how long
Initially a two-year contract after that the contract is reviewed annually by majority of voting shirts or diss interested board members
How are investment advisors paid for their services
Pay the fee typically based on percentage of total assets under management. Usually the largest ongoing expense for the fund
Functions of the investment advisor/fund manager
Manages the funds investment portfolio, research and analysis of financial economic trends, investment strategies, Provides tax information to share holders
The funds operating expenses consist of;
Board of directors stipend, investment advisor management fees, custodial services, transfer agent fee, 12 B 1 feet, administrative including legal accounting and day today expenses
True or false: Sales charges are fund expenses and part of the expense ratio
False
Expense ratio formula
Fund expenses / by average net assets
Mutual funds are capitalized with what?
Common stock
What are closed end funds capitalized with?
Common stock, preferred stock, and bonds
When can I series 6 representative sale closed end funds?
Only during the IPO
Closed-end fund investors buy at the ? and sell at ? Price
Investors buy at the ask price and sell at the bid price
An exchange listed product investing in portfolio of stocks that tracks a particular index such as the S&P 500. Passively managed and have lower ongoing expensive compared to actively managed portfolios.
Exchange traded fund (ETF)
Are ETFs registered as open-end funds? or closed end funds?
They are registered as open-end funds(mutual fund)
What is the difference between a mutual fund and an ETF?
ETFs can be traded during the day and ETFs can Bb bought on margin and sell them short. ETFs are passively managed, and charged a commission for purchases and sales
Are leveraged ETFs used for short term or long term investing?
Short term
Type of ETF received a return opposite of the market, Used as a hedge against market declines
Inverse ETF
Registered as close end fund. They do not trade on exchanges. Illiquid.Required to offer a re-purchase of shares at set intervals. They are called tender offers.
Have higher fees have varying risks can only be redeemed on set dates and set percentages
Interval funds
An investment company that distributes a minimum percentage of net investment income to investors. Eligible to transfer income tax liabilities on net investment income to shareholders
Regulated investment company (RIC)
