IFIC Chapter 13: Financial Statement Basics for Mutual
Fund Representatives
PPNs - correct answer ✔✔What is this? Structured as debt instrument that include a principal
guarantee and interest payments. Performance is tied to an underlying asset. Risk includes
liquidity, credit and currency risk
Hedge Funds - correct answer ✔✔What is this? Lightly regulated pools of capital run by
managers who have great flexibility in strategy. Focus is on absolute returns in any market
condition. lower correlation with traditional asset classes.
Risks:
-complex investment strategy
-lack of regulation
-market and liquidity risk.
Commodity Pools - correct answer ✔✔What is this?
Structured as managed futures that are structured and sold as mutual funds. They actively trade
derivatives products and physical commodities.
Closed-End Funds - correct answer ✔✔A managed pool of securities traded on a stock exchange
that has a fixed # of shares. They are not necessarily traded on net asset value
Exchange-traded Funds - correct answer ✔✔Baskets of securities that are constructed like
mutual funds but traded like individual stocks on an exchange. Similar to index mutual funds in
that they will hold the same stocks, bonds as those in a mrket index. ETFs traded more easily
than MFs
Segregated Fund - correct answer ✔✔An insurance contract with 2 parts: an investment that
produces the return and an insurance policy that covers the risk.
Fund Representatives
PPNs - correct answer ✔✔What is this? Structured as debt instrument that include a principal
guarantee and interest payments. Performance is tied to an underlying asset. Risk includes
liquidity, credit and currency risk
Hedge Funds - correct answer ✔✔What is this? Lightly regulated pools of capital run by
managers who have great flexibility in strategy. Focus is on absolute returns in any market
condition. lower correlation with traditional asset classes.
Risks:
-complex investment strategy
-lack of regulation
-market and liquidity risk.
Commodity Pools - correct answer ✔✔What is this?
Structured as managed futures that are structured and sold as mutual funds. They actively trade
derivatives products and physical commodities.
Closed-End Funds - correct answer ✔✔A managed pool of securities traded on a stock exchange
that has a fixed # of shares. They are not necessarily traded on net asset value
Exchange-traded Funds - correct answer ✔✔Baskets of securities that are constructed like
mutual funds but traded like individual stocks on an exchange. Similar to index mutual funds in
that they will hold the same stocks, bonds as those in a mrket index. ETFs traded more easily
than MFs
Segregated Fund - correct answer ✔✔An insurance contract with 2 parts: an investment that
produces the return and an insurance policy that covers the risk.
