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BU473 (6)
Chapter 17

BU473 Chapter Notes - Chapter 17: Mutual Fund, Money Market Fund, Mutual Fund Fees And Expenses


Department
Business
Course Code
BU473
Professor
Steve Balaban
Chapter
17

Page:
of 3
Chapter(17:(Professional(Money(Management((
The$Asset$Management$Industry$$
$
Private$Management$&$Advisory$Firms$$
Relationship$with$Client$$
Assets$Under$Management$$
Separate$Accounts$$
Customized$$
Investment$Strategy$$
Each$client's$assets$are$held$in$separate$account$$
Security$portfolio$guided$by$the$firm's$overall$investment$philosophy$$
Fundamental$approach$to$investment$will$be$applied$to$all$accounts$$
Basic$Concepts$$
Alternative$Assets$$
Security)Market)Line)for)Traditional)and)Alternative)Asset)Classes)$
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$
Limited$Partnership$$
$$
Investment$Companies$$
Commingling$of$investment$capital$of$several$clients$in$an$investment$company$$
o Invest$a$pool$of$funds$belonging$to$many$individuals$in$a$single$portfolio$of$investments$$
o Issue$new$shares$representing$the$proportional$ownership$of$the$fund$$
$$
Organization$&$Management$of$Investment$Companies$$
Valuating$investment$company$shares$$
o NAV$-$NAV$of$the$fund$shares$will$increase$as$the$value$of$the$underlying$assets$increase$$
o Fund$NAV$=$ !"#$%&'$()*#&+$%,*&"-&.,/0&1"(#-"%2" 34.,/0&567*/8*89
4!"#$%&.,/0&:;$(*8&<,#8#$/02/=9$
$$
Close-End$VS.$Open-End$Investment$Companies$$
Close-End*Investment*Company:*$
Trades$on$secondary$stock$market$$
Doesn't$issue$of$redeem$shares$once$it's$established$(fixed$amount$of$shares$in$a$portfolio)$
Price$of$fund$is$different$from$its$NAV$$
Closed-end$funds$often$sells$below$NAV$$
Open-End*Investment*Company*$
Company$continues$to$sell$and$repurchase$shares$after$their$IPO$$
Fund$stands$ready$to$issue$or$redeem$shares$at$the$NAV$$
Charges$a$load$$
Normally$called$mutual$funds$$
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Load$vs.$No-Load$Fund$$
Load$fund$=$NAV$+$sales$charge$$
No$Load$Fund$=$NAV$$
Fund$Management$Fees$$
Charges$annual$management$fees$to$compensate$professional$managers$of$the$fund$$
Varies$about$0.25%$~$1.00%$$
Management$fees$are$a$major$factor$driving$the$creation$of$new$funds$$
Mutual$fund$fees$have$been$declining$due$to$consolidation$of$the$industry$$
$$
Investment$Company$Portfolio$Objectives$$
Equity$funds:$invest$exclusive$in$stocks$$
Bond$funds:$high$current$income$with$minimal$risk$$
Balanced$funds:$combine$equity$and$bond$$
Money$market$funds:$short-term$securities$$
$$
Global$Investment$Companies$$
Foreign$securities$are$either$international$funds$or$global$funds$$
International$funds$often$hold$only$foreign$securities$from$U.S.,$Germany,$Japan,$Singapore$and$
Korea$$
$$
Ethics$&$Regulation$in$the$Professional$Asset$Management$Industry$$
Complex$interactions$between$provincial$and$federal$laws$$
Goal$-$ensure$portfolio$managers$to$act$in$the$best$interest$of$the$investors$$
Standards$of$Ethics$Behavior$$
o Chartered$Financial$Analysts$Institute$(CFA)$$
Code$of$ethics$$
Standards$of$Professional$Conduct$$
Centre$of$Financial$Market$Industry$$
Asset$Manager$Code$of$Professional$Conduct$$
$$
$
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