Tài chính doanh nghiệp - Chapter 4: Mutual funds and other investment companies

Chapter 4Mutual Funds and Other Investment CompaniesAdministration & record keepingDiversification & divisibilityProfessional managementReduced transaction costsServices of Investment CompaniesUsed as a basis for valuation of investment company shares.Selling new sharesRedeeming existing sharesCalculation Market Value of Assets - Liabilities Shares OutstandingNet Asset ValueUnit TrustsManaged Investment CompaniesOpen-EndClosed-EndOther investment organizationsCommingled fundsREITsHedge fundsTypes of Investment OrganizationsShares OutstandingClosed-end: no change unless new stock is offered.Open-end: changes when new shares are sold or old shares are redeemed.PricingOpen-end: Net Asset Value(NAV)Closed-end: Premium or discount to NAVOpen-End and Closed-End Funds: Key DifferencesMoney Market Fixed IncomeEquityBalance & Income Asset AllocationIndexed Specialized SectorInvestment PoliciesFee StructureFront-end loadBack-end loadOperating expenses12 b-1 chargesdistribution costs paid by the fundAlternative to a loadFees and performanceCosts of Investing in Mutual FundsExchange Traded FundsAllow investors to trade funds based on indexes like stock.ExamplesSPDRSWEBSHOLDERSAllow sector specializationA First Look at Fund PerformanceBenchmark: Wilshire 5000ResultsMost funds underperformNot fair comparison because of costsAdjusted Benchmark: Wilshire 5000 with passive management costs considered.The majority of funds still under-perform.Consistency of Fund PerformanceDo some mutual funds consistently outperform?Evidence suggests that some funds show consistent stronger performance.Depends on measurement intervalDepends on time periodEvidence shows consistent poor performance.Wiesenberger’s Investment CompaniesMorningstarInvestment Company InstitutePopular pressInvestment servicesSources of Information on Mutual Funds