lec02-investmentCompanies

lec02-investmentCompanies - Fin406 Fall 2009 Smeal College...

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Fin406 – Fall 2009 Smeal College of Business Penn State University 1/13/2010 ©2009 JingZhi Huang 1 Lecture 2 - Investment Companies Fin 406 - Fall 2009 1 Professor Jingzhi Huang Smeal College of Business Penn State University Copyright © 2009 JZH I. Motivation Implement an asset allocation using mutual funds and/or ETFs: Evaluate Performance Trade Security Selection Asset Allocation Define Objectives and Constraints Develop Market Expectations •Return •Risk •Economy •Markets •Benchmark Portfolios •Fixed Income •Orders •Leverage •After-tax Returns •Risk 2 The huge and still growing impact of the fund industry Registered funds accounting for about 25% of U.S. household portfolios at year-end 2009 Understand the difference between mutual funds, ETFs and hedge funds •Tax •Horizon •Risk-Return Model •Risk-Return tradeoff •Equity •Cash •Margin •Risk-Adj. Ret. •Benchmarks Summary Statistics Investment Company Statistics Assets ($billion) # of Funds Mutual Funds 10 958 7 703 (Nov 09 3 10,958 7,703 (Nov 09) Closed-end Funds 223.5 632 (Oct 09) ETFs 738 779 (Nov 09) UITs 28.5 5,984 (yr end 08) REITs 305 190 (yr end 04) Hedge Funds >1000 >8000 II. Mutual Funds Mutual funds (open-end funds) are not traded in exchanges and available only through the funds themselves or brokers The valuation of such funds is based on the fund’s NAV (usually available only once a day) The most dominant force among ICs 4 Holding 24% of US equity, 11% of US and foreign corporate bonds, 10% of US government securities, and 47% of commercial papers (Year-end 2007) Cost of investing in mutual funds
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This note was uploaded on 04/06/2010 for the course FIN 100 taught by Professor Staff during the Fall '08 term at Penn State.

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lec02-investmentCompanies - Fin406 Fall 2009 Smeal College...

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