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Characteristics of managed funds
Essentially a collection of assets
Management expense ratio (MER)
Measures the cost of running the fund, standardised so easy to compare across funds, not charged directly to investors. But taken from the fund
Investor, trustee, fund manager
Parties to a managed fund
The types of investments.
Things controlled by the trust document
What are the advantages of managed funds
Easy access to difficult markets ie offshore commercial property.
Tax on profits.
Disadvantages of managed funds
Defined benefit, defined contribution
What are the two types of superannuation funds
Contribution defined, return uncertain
Pays a particular benefit to life when you retire
Types of managed funds
Superannuation - including KiwiSaver
Capital gains not taxed
Taxation on passive index tracks funds
Taxation on most managed funds
Tax is applied to all returns, and come, and capital gains
Characteristics of an active managed fund
Characteristics of a passive managed fund
S R I socially responsible investing
Attempts to maximise social good as well is profit
What is responsible investing?
Investing in funds that take environmental, social or governance matters into account
Positive screening and negative screening
What are the two main approaches to responsible investing?
Used to screen IN investments to make a social or environmental contribution
Used to screen out direct investments in certain areas ie alcohol or tobacco
Examples of industries that can be negatively screened
Alcohol, Tobacco, new killer power, environmental erosion, human rights abuses, pornography, animal exploitation, arms, gambling
Involves opportunistic sharetrading.
What is the hedge fund style known as Long/short equity
Normal trading by hoping to buy shares at a low price and selling them at a high price for capital gain
Sell shares at a high price (the shares have been borrowed) buy at a low price.
Used when shares are overvalued
When to use a sell short strategy
What is a private equity fund?
A collective investment scheme like a managed fund, that invests in equity (ownership) rather than debt
Define a futures contract
Futures are a commitment to buy or sell a SPECIFIC commodity of designated quality at a SPECIFIED price, at a SPECIFIED date in the future. The price is the speculators estimate of the commodity price that is expected
90 day bank bills.
What futures are traded in New Zealand
Define an option
In option is the RIGHT but not the OBLIGATION to buy or sell an underlying FUTURES contract by a specified date in the future
What are the features of exotic investments
Examples of exotic investments
Precious metals, rear coins, gemstones, wine, art,
What is the derivatives
In finance, a derivative is a financial instrument that has a value, based on the expected future price movements of the asset to which it is linked—called the underlying asset
What is a PUT option
Were the seller PUTs the option on the market to sell
What is a CALL option
With the buyer CALLS for options to buy