investment products Flashcards
(27 cards)
regulated CIS (can market themselves to retail clients)
ICVC/OEIC
authorised unit trust
recognised schemes (overseas)
authorised unit trust (supply = demand)
UCITS scheme
qualified investor scheme (only professionals)
non-UCITS retail scheme
regulated unit trusts bid and offer spread
no more than 15%
> covers dealing cots and stamp duty
single price dilution levy and dilution adjustment (swing)
> costs of buying or selling units is passed on to buyers and sellers of units at an ADDITIONAL charge
costs of buying or selling units is passed on to buyers and sellers of units by incorporating them within the unit price
OEICS ACD and depositary
ACD responsible for investment decisions and pricing
depositary has custody of assets and ensures ACD acts within regulatory framework
one way pricing
no secondary market
UCITS restrictions
transferable securities (trade on eligible market)
approved money market instruments
units in CIS
derivatives and forwards
deposits
for CIS, movable and immovable property
eligible markets characteristics
regulated
regular hours
recognized by regulator
open to public
liquid
arrangements for settlement
ITC properties
fixed share capital
listed on LSE
borrow funds
not subject to FCA restrictions
investment in single company to 15% of NAV
governed by company law, FCA listing rules and tax law
closed-ended
after launch do not normally contract or expand
RETIS /VCT
two share class (preference and ordinary)
pay dividends 2 yearly
share price usually trades at a discount
strucutred products
> Combo of security and derivative have a fixed life and at the end payment to investor
eligible for tax efficient wrappers : ISA + SIPP
1. strucutred deposit : interest linked to performance of asset. deposit protected by FSCS
2. strucutred capital protected product: zero-coupon bond + long option. not protected by FSCS
3. strucutred capital at risk product: some or of the investors capital at risk to gain additional return
HEDGE FUNDS ARE NOT REGUALTED BUT STILL
MANAGER REQUIRES AUTHORISATION BY FCA
fixed and mngmnt fees
1-2% can be up to 5%
25% of any upside performance
hedge fund investm characteristics
> short selling
borrowing
derivatives
private equity funds
> venture capital (new firms)
growth capital (minority stake in an established firm)
buyouts (public to private firm) less risky than venture capital
general partners and limited partners
run the fund and invest in it
commit capital (usually 10yrs)
basic types of investment
primary investment : commit capital to new fund,very risk primarily because as co not yet bought
secondary investment : limited partner sells holding. new investor benefits from shorter holding period and knowledge of the assets
co-investment : limited partners invest directly in the co held in the fund allows for greater exposure to the cos than fund rules allow
fees : mngnt fees 1-2% + carried interest 20% of total returns or returns in -excess (hurdle rate)
- unit trust manager
- trustee
- investment manager
- defines terms of trust
markets trust
receive payments
appoints trustee - create and redeem units
legal owner (bank or insurance company)
ensures compliance with trust deed - purchase and sale of securities
provision of valuations to trustee
investment strategy
1 and 3 can be the same body
dilution levy (authorised unit trust)
cots of buying and selling passed on buyers or sellers of units at an additional charge
dilution adjustment (authorised unit trust)
costs of buying and selling passed on to buyers and sellers of units within unit price
CIS restrictions:
Borrowing
Single issuer securities
units in CIS from a single fund
Government securities from a single issuer
Government securities from a single issue
of NAV:
max 10%
max 5% (can be 10% for max 4 firms)
max 20%
max 35% (at least 6 issuers)
max 30%
=> min level of diversification exists
CIS restrictions:
non-voting shares
debt securities
money market instruments
CIS units
% of a single institutions securities owned :
max 10%
max 10%
max 10%
max 25%
=> fund does not seek to control an issuer of securities
ETP
OPEN-ENDED fund
primary and secondary mrkts
UCITs compliant
recognition status
physical and synthetic ETF
> portfolio mngr constructs the portfolio by replication
use derivatives to gain exposure to index e.g. equity swaps
synthetic ETF
> cheaper than physical replication > greater leveraged exposure
short exposure to tracked index (inverse fund)
risk:
default
collateral (can vary from value from the index)
characteristics of ETF
> open-ended (not affected from supply and demand)
tracker index fund
trade on secondary markets
low charges (nav on primary market different to share prices in secondary market)
no stamp duty
can be shorted
dis:
leverage
unique trading costs
differing underlying assets
