Professional Asset Management

Professional Asset Management - PROFESSIONAL ASSET...

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  PROFESSIONAL ASSET MANAGEMENT
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Basic Categories    Private Management : Clients each have a separate account {popular with institutions} Investor 1 Investor 2 Asset manager Account 1 Account 2 $ $ $$
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Basic Categories Investment Companies : Sell shares of the fund and invest the proceeds in a portfolio of stocks {popular with individuals} Investor 1 Investor 2 Asset manager Fund Portfolio $ $ $$ Fund Shares Fund Shares
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Professional Asset Management vs. Individuals 1. Diversification 2. Record Keeping 3. Professional Management 4. Lower Transaction Costs  
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Net Asset Value   ( 29 ( 29 g Outstandin Shares Fund Total Expenses Fund Portfolio of Value Market Total - = NAV Example Market Value = $100 mil Number of Shares = 10 mil NAV = $100 / 10 = $10 / share Suppose Market Value goes up to $112.5 mil, and the management fees during that period were $0.1 mil. What is the ending NAV? NAV = (112.5 – 0.1) / 10 = $11.24 / share
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Types of Investment Companies Closed-end funds Open-end funds (a.k.a. mutual funds)
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Closed End Funds Stock of the fund trades on the regular
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  • Spring '08
  • Hansen
  • Valuation, Closed-end fund, expense ratio

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