THE ASSET MANAGEMENT INDUSTRY: STRUCTURE AND EVOLUTION:
- Private management and advisory firms : Investment firms: clients pay fees for uniquely/
customised investment advice
Each person’s money is invested into unique accounts
Investment strategy: guided by firm’s overall investment strategy.
Two types :
a. Asset management : institutional investors
b. Wealth management :high network individuals
- Investment ( fund ) companies : general solution
Each person’s money is pooled in to invest in a fund ( portfolio of securities)
a. Closed end :public companies , traded on the exchange at a discount ( due to liquidity)
b. Open end ( mutual funds) shares issued at NAV
Front load funds: commissions are taken off in the beginning when you buy the fund.
low load funds/ deferred sales charges : the commissions are taken off when the funds are sold.
Load fund : 8% fee, earns 15%
Charge: 1000 x 8% = 80
Net fund invested : 920
Your fund at the end = 920 x 1.15 = 1058
HPR = 1058/ 1000 = 1.058
HPY = 5.8%
No load fund : 1% redemption, earns 12%
Your fund at the end = 1000 x 1.12 = 1120
Charge: 1120 x 1% = 11.2
Your total at the end = 1108.8
HPR = 1108/1000 = 1.108
HPY = 10.88%
- Fund management fees :Fees range from 0.25 to 1% with fees declining over time in
comparisons to ETF
- Classes of funds : Equity, bond, balanced, money market, flexible portfolio ( hybrid) funds.
- Classification: means of distribution , objective
- Global investments (funds invested in foreign securities, including Canadian securities) Alternative investing