Investment Planning Part 1

Frage	Antworten
Independent Financial Advisers	unbiased financial advice from whole of market
Tied Agents	can only advise on products of one provider
Multi tied agents	recommend from a limited panel of providers
Wealth Management Services can be offered either on a	Discretionary Basis or Non Discretionary/Advisory basis
Fund supermarket is an	internet based one stop shop for retail investment funds
A wrap platform is	similar to a fund supermarket but used by advisors - may have pension plans and investment bonds as well as funds
Fund of funds can be either fettered or unfettered what does this mean	fettered invests only in funds run by the same management group. unfettered can invest in any
a multi manager product does what	runs segregated mandates by individually selected fund managers
Variants of Collective Investment Schemes are called	Mutual Fund - US SICAV - Europe Unit Trust or OEIC - UK & Ireland
UCITS funds do what	comply with EU rules; seen as measure of quality and marketed in Middle East & Asia as result
Benefits of Collective Investment	economies of scale diversification professional investment management access to markets, assets classes or investment strategies not normally available to individual investor possible tax deferral the benefit of regulatory oversight
What is the key difference between an authorised and unauthorised fund	Only authorised funds can be marketed to retail investors
Open ended funds can do what	issue and redeem shares at any time.
Management Fees are	the cost of the investment adviser managing the portfolio
Distribution and services fees are	the fees paid to cover marketing and selling shares, responding to investor enquiries
Other expenses are	custody charges, legal & accounting expenses and other administrative expenses
front end load is what	a sales charge made at purchase of fund paid to broker
purchase fee is what	a fee paid to the mutual fund to cover costs of purchase
A back-end load is	a fee paid when shares are sold aka deferred sales charge
What is a Redemption fee	paid by an investor to the fund when redeeming
An exchange fee may be charged when	an investor wants to switch to another fund within the same group or family of funds
3 typical shares classes of mutual funds Class A Class B Class C	A - impose for end load but lower annual expenses B - impose back end load and operating expenses C - impose operating expenses and front end load but at lower level than A & B. Typically higher annual costs
When is a share trading at a premium	When the share price is above the net asset value
When is a share trading at a discount	When the share price is below the Net Asset Value
What is an ETF	An exchange traded fund, listed and traded on Stock Exchange which typically tracks the performance of an index
What are the 2 types of Index Replication for ETF	Physical or Synthetic
Describe Physical Replication	Can be achieved by either Full replication or Sampling. Full the funds tries to mirror the index by holding shares in exactly the same proportion as in the index itself. Sampling - choosing shares which are representative of the index
How does an ETF achieve Synthetic Replication	By entering into SWAP agreements with 1 or more counterparties
Advantage of Physical Replication	Simplicity
Disadvantages of Physical Replication	Higher Costs as more trading Greater Tracking Error
Advantages of Synthetic Replication	Lower costs Lower tracking error
Disadvantage of Synthetic Replication	Greater counterparty risk
4 potential benefits of a Structured Product are	Possible Capital Protection Tax efficient access to fully taxable investments enhanced returns reduced risk
4 ways Private Equity can recoup investment in business	the investee company buys it out the PE firm sells it shares to another investor trade sale - sale of the company shares to another firm the company achieves a stock market listing
Sukuk Investments are	Islamic bonds linked to underlying tangible/intangible assets .
money weighted return does what	compares the value of a portfolio from the start of period, plus capital introduced with the end value
time-weighted return	was designed to remove the distortion of capital being introduced/withdrawn from calculating portfolio performance
what is the usual benchmark for risk free rate of return	short dated government bonds or treasury bills
what is the risk premium	the additional return above the risk free rate of return
What is volatility	the changes in a share's value
High volatility means	a security's price can change dramatically in short periods of time
Low volatility means	the security's price does not fluctuate dramatically
How is volatility measured	By standard deviation of the returns from the mean
What is Total Return	The return achieved taking into account growth in capital value plus income received
What is Beta	A measure of the average historic sensitivity of a fund's return to the wider market
Beta of 1 means	the stock has the same volatility as the market as a whole
Beta greater than 1 means	the stock will be expected to move more than the market as a whole
A beta of 1.5 means	it has a volatility 50% greater than the market portfolio i.e. it can be expected to move half as much again or for every 1% market move it moves 1.5%
Beta of less than 1 means	the stock is less volatile than the market so can be expected to move less e.g. 0.7 means 30% less
Alpha is what	the return of any outperformance of a fund/portfolio against it's benchmark
Unsystematic risk is	company specific risk
Systematic risk is	risk stemming from broad equity market movements or market risk derived mainly from changes in economic factors
Systemic risk refers to	the breakdown of the financial system

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Investment Planning Part 1

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