chap04 - 4 Mutual Funds and Other Investment Companies 4.1...

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Chap4 Mutual Funds 1 4 Mutual Funds and Other Investment Companies 4.1 What are investment companies? ( 4 4.2 Types of investment companies 4.3 Mutual funds ( 4 4.4 Fee structure and fund return ( 4 4.5 Taxation ( P 4.6 Exchange-traded funds ( 4 4.7 Fund performance 4.8 information on mutual funds ( P
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Chap4 Mutual Funds 2 4.1 Investment Companies p84 Investment companies are financial intermediaries that collect funds from individual investors and invest those funds in securities or other assets. What do they do for investors? Diversification & divisibility: enable investors hold different securities. Professional management Reduced transaction costs
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Chap4 Mutual Funds 3 Net Asset Value 4 p84 NAV is the value of each share. It equals assets minus liabilities expressed on a per-share basis Market Value of Assets - Liabilities Shares Outstanding Used as a basis for valuation of investment company shares Selling new shares Redeeming existing shares NAV=
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Chap4 Mutual Funds 4 Net Asset Value (Exercise) Consider a mutual fund that manages a portfolio of securities worth $200 million. The fund owes $4 million to its investment advisors and another $1 million for rent and wages due. The fund has 5 million shares. What is the NAV of the fund?
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Chap4 Mutual Funds 5 4.2 Types of Investment Companiesp85-87 According to the investment company act of 1940: Unit investment trusts: Managed investment companies Other investment organizations
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Chap4 Mutual Funds 6 Unit investment trusts p85 Unit investment trusts: money pooled from many investors that is invested in a portfolio fixed for the life of the fund. The portfolio is fixed for the life of the fund Little active management Investors may sell the shares back to the trustee for NAV. The trustee either sell asset or sell the shares to other Lost market share to mutual funds.
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Chap4 Mutual Funds 7 Managed investment companies p85 The fund’s board of directors is elected by shareholders. The portfolios are managed (bought and sold) by
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chap04 - 4 Mutual Funds and Other Investment Companies 4.1...

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