LLQP SEGREGATED FUNDS ACTUAL TEST
PAPER QUESTIONS AND SOLUTIONS
COMPLETE STUDY GUIDE
●● What is active management?
Answer: Fund managers make investment decisions based on their
outlook for markets and securities, intending to outperform a specific
benchmark index.
●● What is passive management?
Answer: Managers do not make security selections; they assume only
the systematic risk associated with investing in a particular asset class,
typically replicating the returns of a market index.
●● What are the common types of managed products?
Answer: Mutual funds, ETFs, segregated funds, liquid alternatives,
hedge funds, listed private equity funds, closed-end funds, and labour-
sponsored venture capital corporations (LSVCC).
●● What are the advantages of managed products?
Answer: 1) Professional management 2) Economies of scale 3) Low-cost
diversification 4) Liquidity and flexibility 5) Tax benefits 6) Low-cost
investment options.
,●● What are the disadvantages of managed products?
Answer: 1) Lack of transparency 2) Liquidity constraints 3) High fees 4)
Volatility of returns.
●● What is a mutual fund?
Answer: A single investment vehicle sponsored by an investment
management company on behalf of many investors, raising capital by
selling shares or units.
●● How does a mutual fund make money?
Answer: From dividends and interest received on securities held, and
from capital gains from trading its investment portfolio.
●● What is the Fund Facts document?
Answer: A document that discloses key information about a mutual fund,
including risk, main types of securities held, and historical returns,
limited to two double-sided pages in plain language.
●● What is the NAVPS?
Answer: Net Asset Value Per Share — the theoretical amount
shareholders would receive per share if the fund sold all its portfolio
investments at market value.
●● What is the formula for NAVPS?
, Answer: NAVPS = (Total Assets - Total Liabilities) / Total Number of
Shares or Units Outstanding.
●● What is low-cost professional management as an advantage of
mutual funds?
Answer: Fund managers are investment specialists who analyze markets
and select securities matching the fund's objectives.
●● How does diversification benefit mutual fund investors?
Answer: A typical large fund may hold 60-100+ securities across 15-20
industries, providing broad diversification that small investors could not
achieve individually.
●● What is a pre-authorized contribution plan?
Answer: An arrangement allowing investors to make regular small
purchases of mutual funds, sometimes starting with as little as $100.
●● What is the liquidity advantage of mutual funds?
Answer: Shareholders can redeem shares or units for cash at NAVPS,
with payments made within two business days after NAVPS is
calculated.
●● What is the ease of estate planning advantage?
PAPER QUESTIONS AND SOLUTIONS
COMPLETE STUDY GUIDE
●● What is active management?
Answer: Fund managers make investment decisions based on their
outlook for markets and securities, intending to outperform a specific
benchmark index.
●● What is passive management?
Answer: Managers do not make security selections; they assume only
the systematic risk associated with investing in a particular asset class,
typically replicating the returns of a market index.
●● What are the common types of managed products?
Answer: Mutual funds, ETFs, segregated funds, liquid alternatives,
hedge funds, listed private equity funds, closed-end funds, and labour-
sponsored venture capital corporations (LSVCC).
●● What are the advantages of managed products?
Answer: 1) Professional management 2) Economies of scale 3) Low-cost
diversification 4) Liquidity and flexibility 5) Tax benefits 6) Low-cost
investment options.
,●● What are the disadvantages of managed products?
Answer: 1) Lack of transparency 2) Liquidity constraints 3) High fees 4)
Volatility of returns.
●● What is a mutual fund?
Answer: A single investment vehicle sponsored by an investment
management company on behalf of many investors, raising capital by
selling shares or units.
●● How does a mutual fund make money?
Answer: From dividends and interest received on securities held, and
from capital gains from trading its investment portfolio.
●● What is the Fund Facts document?
Answer: A document that discloses key information about a mutual fund,
including risk, main types of securities held, and historical returns,
limited to two double-sided pages in plain language.
●● What is the NAVPS?
Answer: Net Asset Value Per Share — the theoretical amount
shareholders would receive per share if the fund sold all its portfolio
investments at market value.
●● What is the formula for NAVPS?
, Answer: NAVPS = (Total Assets - Total Liabilities) / Total Number of
Shares or Units Outstanding.
●● What is low-cost professional management as an advantage of
mutual funds?
Answer: Fund managers are investment specialists who analyze markets
and select securities matching the fund's objectives.
●● How does diversification benefit mutual fund investors?
Answer: A typical large fund may hold 60-100+ securities across 15-20
industries, providing broad diversification that small investors could not
achieve individually.
●● What is a pre-authorized contribution plan?
Answer: An arrangement allowing investors to make regular small
purchases of mutual funds, sometimes starting with as little as $100.
●● What is the liquidity advantage of mutual funds?
Answer: Shareholders can redeem shares or units for cash at NAVPS,
with payments made within two business days after NAVPS is
calculated.
●● What is the ease of estate planning advantage?
