BFIN3020 CH 17

managed product

a pool of capital gathered to buy securities according to a specific investment mandate

advantages of managed products

professional management, economies of scale, diversification, liquidity, tax benefits, low cost

disadvantages of managed products

lack of transparency, liquidity constraints, potential high fees, volatility of returns

fund facts document

a disclosure document designed to give mutual fund investors key information about a fund. Contains info material to investment decision.

offering price (mutual funds)

the price an investor pays to purchase shares in the fund.

net asset value per share

market value of the fund per unit. (Total fund assets-liabilites)/total units outstanding

units in a mutual fund are managed during the ________ period until estate assets are distributed

probate

what are the regulatory filings provided by a mutual fund sponsor?

annual information form (AIF), audited annual/interim financial statements, annual report.

front end load

commission charge charged up front

what document identifies the fee for short term trading

prospectus/fund facts

how much could a short term trading fee be?

as high as 2% of the purchase price of the securities redeemed.

how might a mutual fund be structured?

trust, corporation, but most commonly a open end trust

open end trust

unincorporated open end trust allows the trust to avoid taxation by passing on tax obligation to untiholders

trust deed

the formal document that outlines the agreement between issuer and holders. includes principal investment objectives, investment policy, and restrictions. it also states fund manager, distributor, and custodian.

how do mutual funds structured as corporations differ from ones that are open end trusts?

Mutual funds structured as corporations are subject to corporate taxation and must distribute a portion of their earnings as dividends to shareholders, while open end trusts pass tax obligations to unit holders directly, avoiding corporate taxes.

who has the ultimate responsibility to ensure that the investments in a mutual fund are consistent with the fund’s investment objectives?

directors (corporation) and trustees (open end trust)

fund manager

responsible for day to day supervision of fund’s investment portfolio

fund manager

calculates fund’s NAVPS, prepares fund facts/simplified prospectus, supervises shareholder recordkeeping, and provides custodian with documentation for the release of cash/securities.

what are the types of mutual fund distributors?

IAs employed by securities firms, sales forces that control management & distribution groups, independent direct sales organizations, and in-house distributors (trust companies, banks, credit unions)

custodian

collects money received from fund’s buyers and from portfolio income, and arranges for cash distributions through dividend payments, portfolio purchases, and redemptions.

distributors duties

explaining funds in simple language to clients, handle client inquiries, accept and transmit orders for redemptions. Financial planning assistance including KYC.

registrar

a trust company appointed to monitor the issuing of common/preferred shares. Audits the transfer agent. Keeps track of who owns shares.

transfer agent

trust company appointed to maintain shareholder records of purchases, sales, and account balances. Keeps track of who owns shares.

a custodian company can also act as ______ and _______

registrar and transfer agent

What is the deadline time to get the closing price for the purposes of calculating NAVPS?

4:00pm EST.

payment for redeemed securities in a mutual fund must be made within how many days after the NAVPS is determined?

2 business days.

How often does NAVPS need to be calculated for new funds?

once a week

most large mutual funds calculate NAVPS how often?

daily

what determines sales charges levied?

type of fund, the sponsor/distribution method, the amount invested, and method of purchase.

management expense ratio (MER)

the total of all management fees and other expenses charged to a fund, expressed as a percentage of the fund’s net asset value for the year.

trailer fee

fund manager pays trailer fee to mutual fund sales representative, and is included in the management fees in MER.