lecture 5

lecture 5 - The Evolution of the mutual fund industry Click...

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Click to edit Master subtitle style The Evolution of the mutual fund industry
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Current products and issues ETFs – Problem Number 1 Hedge funds – Problem Number 1A REITS – Not so much a problem Mutual Fund Issues Hot Money – Cash Drag Fees Open end – Closed end Timing and day trading Late Trading
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Exchange Traded Funds Diamonds, SPDRs, HOLDRS, VIPRs Quasi-closed-end fund tracking an index, country or sector The funds hold a basket of index stocks Operating expenses paid out of assets Low expenses Exchange listed AMEX
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ETF Success – Hedge Fund Success
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Some Major ETFs and Their Sponsors
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Notes on hedge funds Sophisticated Investors Closing on $2 Trillion in assets under management Well, was closing in on $2 Trillion $1.4-$1.6 Trillion is the most recent estimate I have heard Shorting is a frequent part of the investment strategy Leverage is a crucial part of the investment strategy Trading execution is a crucial part of the investment strategy 2 and 20 contract for managers
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Top 10 Hedge Fund Pay Packages Manager Group/Fund 2006 Pay James Simons Renaissance $1700 million Kenneth Griffin Citadel Investment $1400 million Edward Lampert ESL Investments $1300 million George Soros Soros Fund $950 million Steven Cohen SAC Capital Advisors $900 million Bruce Kovner Caxton Associates $715 million Paul Tudor Jones II Tudor Investment $690 million Timothy Barakett Atticus Capital $675 million David Tepper Appaloosa $670 million Carl Ichan Ichan Partners $600 million
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The Structure of a Mutual Fund
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Open-ended mutual funds Issued and redeemed at Net Asset Value Funds charge for expenses front end load back end load operating expenses 12b-1 fees paid directly by the investor paid out of fund assets
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Obj10 Open ended fund - Prices it shares at NAV
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Fund minimums Unless you are special rich enough funds like Vanguard’s Admiral line of funds tax savvy for $250K control fund turnover and other activities to minimize taxes such as limiting the openness of the fund
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Mutual Fund Complexes by Type of Intermediary December 2005 Obj101 Source: 2006 Investment Company Fact Book
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Assets of Mutual Funds, 2005 (in billions) $567.30 $1,357.30 $2,040.50 $4,940.00 Source: Investment Company Institute Equity Funds (56%) Hybrid Funds (6%) Bond Funds (15%) Money Market Funds (23%)
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Net Assets of Equity Funds $45.1 $55.9 $30.9 $39.2 $32.7 $44.4 $53.7 $83.1 $161.4 $194.7 $239.5 $514.1 $852.8 $1,249.1 $1,726.1 $2,368.0 $2,978.2 $4,041.9 $3,418.2 $2,666.5 $3,684.8
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lecture 5 - The Evolution of the mutual fund industry Click...

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