PM 2: Institutions

  • Created by: charlie
  • Created on: 20-05-18 15:18
NAV (Net Asset Value)
Mutual funds trade once a day at NAV
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Mutual funds
Conventional investment management assets/ Types: equity funds/ bond funds/ money market funds (ST cash-like savings account)/ mixed funds/ other funds
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Open-ended (mutual fund/ unit trust)
Most common/ bought/ sold on demand once a day always at NAV: profit = purch/ more shares created (creation) / loss = sold/ shares taken out (redemption)/ illiquidity issues cause fire sales/ not traded on open market
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Closed-ended (UK: investment trusts)
Less common/ launched through IPO/ traded on open market (like ETF)/ limited amount/ close to NAV (but affected by supply + demand)
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Fees (Very Important)
In EMH underperformance from WDP comes from FEES: 1) Initial (load) fees (once when buying) 2) AMC (ongoing/ use TER) 3) Performance related (exceeds pre-specified benchmark)
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ETFs (+ves/ -ves)
+Ves: trade like open-ended (close to NAV) + closed-ended (continuous/ transparent)/ economies of scale (low fees)/ innovative/ -Ves: require new indices to track
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Hedge funds (+ves/ -ves)
+Ves: Strong performance incentives/ freedom in investments/ switch strategies -Ves: only available to institutions/ HNW/ High fees/ light reg. (transparency)/ Illiquid shares ('lock up')
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Pension funds (+ves/ -ves)
+Ves: long term/ prudent investing/ treats illiquidity/ insolvency differently due to LT commitments/ -Ves: low competition (little choice)
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Other cards in this set

Card 2

Front

Mutual funds

Back

Conventional investment management assets/ Types: equity funds/ bond funds/ money market funds (ST cash-like savings account)/ mixed funds/ other funds

Card 3

Front

Open-ended (mutual fund/ unit trust)

Back

Preview of the front of card 3

Card 4

Front

Closed-ended (UK: investment trusts)

Back

Preview of the front of card 4

Card 5

Front

Fees (Very Important)

Back

Preview of the front of card 5
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