one form of pooled investments What is it? i.e.

single portfolio that contains investment funds from multiple investors Net asset value NAV = Total Net value in the fund (pool) / Number of shares issued
Investors can

buy newly issued shares at NAV redeem shares at NAV (sell back to the fund) Load funds: up-front fees (for purchasing fees), redemption fee No-load funds: no additional fees

Open-end funds Fees 2 categories

Ongoing management fees One-time fees

No new investment money into the fund Actively managed Closed-end funds trade like equity shares (on exchanges or over-the counter) fixed number of outstanding shares charge ongoing management fees short-term debt securities Money Market Funds very low risk NAV usually DOWN when securities value DECREASED Bond Mutual Funds 3 types fixed-income securities Index funds passively managed: portfolio is constructed to match the performance of particular index Actively managed funds: select individual securities, producing greater return than benchmark index Higher management fess higher turnover of portfolio securities greater tax liabilities traded in market: traded as equity shares, sold short, purchased on margin passively managed: match a typical index Shares market price DIFFERS NAV (difference in Supply and Demand) No shares issued

Stock Mutual Funds

Exchange-traded funds (ETFs)

d. Mutual funds

Separately Managed Accounts

owned by single investor (individual or institution) managed according to their needs & preferences

READING 42. PM AN OVERVIEW

sold only to qualified investors minimum investment required Convertible bond arbitrage funds: buying convertible bonds and selling the stock -> earn profit from mispricing Dedicated Short Bias: taking more short positions than long positions Emerging markets: investing in emerging markets Hedge Funds Other forms of Pooled Investments Categories/Strategies Equity Market Neutral: eliminate market movement by OFFSETTING long positions by short positions (by the same amount) Event Driven Funds: invest in response to 1-time corporate events, such as M&A Fixed-Income Arbitrage: profit from mispricing Global Macro: speculate on international interest and exchanges rates changes, use of derivatives and leverage Long/Short funds: buy and sell limited number of investors invest in the fund buy entire public companies, take them private reorganised firm to increase its cash flow Buyout funds (Private Equity Funds) pay down its debt increase the value of its equity sell the restructured firm or its parts to the public exit this investment after 3-5 years focus on specific industries Invest in companies in their START-UP phase Grow them into valuable companies Venture Capital Funds Sold publicly via an IPO or to an established firm. focus on specific industries