AFM 121 Final
Terms in this set (139)
Diversification
Can be sold short
Advantages of closed-end
funds? Don't require cash available to redeem shares
May have lower MERs as they involve the administration
of a fixed # of units
Low cost professional management
Diversification
Advantages of mutual
Variety of funds and transferability
funds?
Liquidity
Loan collateral and eligible for margin
Are dividend payments No
obligatory? (like interest
payments)
Business risk The risk to that particular business or industry
Use proper care
Code of ethics for mutual Act in best interest of client
fund managers? Display integrity and trustworthiness
Maintain client confidentiality
The risk that a company goes bankrupt or defaults on its
Default risk
debt obligations
Compensation - hedge funds will be paid on a
combination of funds administered and performance;
Difference between mutual
MF paid strictly on funds administered
fund and a hedge fund?
Restrictions - Hedge funds don't have to adhere to a lot
of the restrictions above
, Interest rate anticipators (bet on rate rising or falling)
Term to maturity (restricted to specific maturities i.e. 3-5
years)
Different bond manager
styles? Credit quality (identify the best yields for a given credit
quality; may bet on credit upgrades/downgrades)
Spread Traders (long-short bond strategy betting on
yield spreads between bonds to rise/fall)
Growth (focus on companies with high revenue growth
and may pay high P/E for exposure to high growth)
Different equity manager Value (focus on companies with stable revenue and pay
styles? low P/E)
Sector rotation (macro driven industry selection i.e.
industrial vs consumer discretionary)
Early stage (emerging or initial growth)
Growth (rapid growth in the text)
Different stages in an
industry's life?
Mature (growth slows to GDP)
Decline (product obsolescence)
Subject to stock exchange reporting requirements
Disadvantages of a closed- Fewer available
end fund? Discount to NAV may increase
Less liquid than open-end funds
Costs:
- Sales fee (paid to distributors)
Disadvantages of mutual
- Management fees (paid to managers)
funds?
Unsuitable for short term investments
Tax issues of the investor vs the fund
Terms in this set (139)
Diversification
Can be sold short
Advantages of closed-end
funds? Don't require cash available to redeem shares
May have lower MERs as they involve the administration
of a fixed # of units
Low cost professional management
Diversification
Advantages of mutual
Variety of funds and transferability
funds?
Liquidity
Loan collateral and eligible for margin
Are dividend payments No
obligatory? (like interest
payments)
Business risk The risk to that particular business or industry
Use proper care
Code of ethics for mutual Act in best interest of client
fund managers? Display integrity and trustworthiness
Maintain client confidentiality
The risk that a company goes bankrupt or defaults on its
Default risk
debt obligations
Compensation - hedge funds will be paid on a
combination of funds administered and performance;
Difference between mutual
MF paid strictly on funds administered
fund and a hedge fund?
Restrictions - Hedge funds don't have to adhere to a lot
of the restrictions above
, Interest rate anticipators (bet on rate rising or falling)
Term to maturity (restricted to specific maturities i.e. 3-5
years)
Different bond manager
styles? Credit quality (identify the best yields for a given credit
quality; may bet on credit upgrades/downgrades)
Spread Traders (long-short bond strategy betting on
yield spreads between bonds to rise/fall)
Growth (focus on companies with high revenue growth
and may pay high P/E for exposure to high growth)
Different equity manager Value (focus on companies with stable revenue and pay
styles? low P/E)
Sector rotation (macro driven industry selection i.e.
industrial vs consumer discretionary)
Early stage (emerging or initial growth)
Growth (rapid growth in the text)
Different stages in an
industry's life?
Mature (growth slows to GDP)
Decline (product obsolescence)
Subject to stock exchange reporting requirements
Disadvantages of a closed- Fewer available
end fund? Discount to NAV may increase
Less liquid than open-end funds
Costs:
- Sales fee (paid to distributors)
Disadvantages of mutual
- Management fees (paid to managers)
funds?
Unsuitable for short term investments
Tax issues of the investor vs the fund
