【中山大学431金融 投资学】Chap004.pdf

Services of Investment Companies • Administration record keeping • Diversification divisibility • Professional management • Reduced transaction costs Net Asset Value • Used as a basis for valuation of investment company shares. • Selling new shares • Redeeming existing shares • Calculation • Market Value of Assets - Liabilities • Shares Outstanding Types of Investment Organizations • Unit Trusts • Managed Investment Companies • Open-End • Closed-End • Other investment organizations • Commingled funds • REITs • Hedge funds Open-End and Closed- End Funds: Key Differences Shares Outstanding Closed-end: no change unless new stock is offered. Open-end: changes when new shares are sold or old shares are redeemed. Pricing Open-end: Net Asset Value(NAV) Closed-end: Premium or discount to NAV Investment Policies • Money Market • Fixed Income • Equity • Balance Income • Asset Allocation • Indexed • Specialized Sector Costs of Investing in Mutual Funds •Fee Structure •Front-end load •Back-end load •Operating expenses •12 b-1 charges •distribution costs paid by the fund •Alternative to a load •Fees and performance Exchange Traded Funds • Allow investors to trade funds based on indexes like stock. • Examples • SPDRS • WEBS • HOLDERS • Allow sector specialization A First Look at Fund Performance • Benchmark: Wilshire 5000 • Results • Most funds underperform • Not fair comparison because of costs • Adjusted Benchmark: Wilshire 5000 with passive management costs considered. •The majority of funds still under-perform. Consistency of Fund Performance • Do some mutual funds consistently outperform? • Evidence suggests that some funds show consistent stronger performance. • Depends on measurement interval • Depends on time period • Evidence shows consistent poor performance. Sources of Information on Mutual Funds • Wiesenberger’s Investment Companies • Morningstar •