Chapter 4 - Mutual Funds: Measuring Performance By: Nicolo...

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Mutual Funds: Measuring Performance By: Nicolo Freyberg, Remer Rietkerk, Max Nellessen, Jim Li, Nick Mulder
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Agenda
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Investment companies What are they? Financial intermediaries that invest funds of individual investors in securities or other assets. Why would you invest in a investment company? 1. Record keeping and administration 2. Diversification and divisibility 3. Professional management 4. Lower transaction costs How much do you own? Net asset value = Market value of assets – liabilities shares outstanding
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Unit Investment Trusts Pools of money invested in a portfolio that is fixed for the life of the fund. Brokerage buys securities, deposits them, then sells “redeemable trust certificates” to public. 1. Unmanaged 2. Uniform assets 3. Low management fees Liquidated at NAV .
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Managed Investment Companies Open-end fund : A fund that issues or redeems its shares at NAV. Closed-end fund : A fund with fixed number of shares which may not be redeemed but are traded at prices differing from NAV. Run by a management company that often establishes the fund charges a “load”. Closed end funds traded on exchanges, typically at discounts. Why is this theoretically puzzling? Morgan Stanley Eastern Europe Fund traded at +39% May 2006 vs. -6% October 2006.
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Other investment organizations Real Estate Investment Trusts : Closed-end fund that invests in real estate (equity trusts) or mortgage trusts. Hedge funds
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Chapter 4 - Mutual Funds: Measuring Performance By: Nicolo...

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