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Flashcards in non-depository institution Deck (22)
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1

Whats the major difference between investment banks and commercial banks?

-their role in retail markets
-They are not allowed to accept deposits in most countries

2

What 3 areas do investment banks operate in?

1) security trading
2) asset management
3) investment banking (corporate funding & trade finance

3

what are some sources of funds for investment banks

- financial advisory services
- underwriting the issue of new securities
- rights issue, share placements
mergers & acquisitions
- organising meduim to L/T finance facilities
- Investment management

4

what conflict of interest occurs with a invesment bank?

one part of the bank is advising on an asset sale or an initial public offering while the bank's research
arm is producing research for the investment banks' investor clients
about the quality of the assets or the IPO

5

what % of financial assets are managed by managed funds (unit trusts)

19%

6

4 main categories of managed funds

1) cash management trusts
2) Unit trusts
3) superannuation funds
4) hedge funds

7

sources of funds for managed funds

investors pool funds to invest in claims against (shares) a
portfolio of securities managed by professional manager.
may be periodic payments or lump sum put into managed
funds

8

uses of funds for managed funds

invested by professional fund managers according to fund’s
trust deed.

9

4 types of managed funds and their aim

1. Capital guaranteed funds-seeks positive return but offers
protection from loss-likely to invest in bonds and …
2. Capital stable funds- secure investment but no guarantee of
capital
3. Balanced growth funds- longer-term income stream & some
growth- likely to invest in range of financial assets
4. Managed growth funds- seeking maximum return from
capital growth- % of equity highest of all & equity likely to be
companies with higher risk but good growth prospects

10

the 4 managed funds set up under a trust deed

1. Equity trusts
2. Fixed-interest trusts
3. Mortgage trusts
4. Property trusts

11

are most managed funds listed or unlisted?

- most are unlisted with units being bought & sold thru. fund manager

12

are most managed funds open or closed ended?

Majority of managed funds in NZ are open-ended & offered via fund
manager

13

what securities an exchange traded fund hold?

they hold all or majority of shares in S&P/ASX200

14

definition of open ended

: more units are created as demand increases.
Prices calculated regularly by fund manager

15

definition of close ended

: number of units are generally fixed
- prices for listed trusts based on market value & can often differ
from net asset value (NAV) & trade at discount or premium

16

Superannuation/Pension Sources of funds

- from members who make periodic
contributions & income derived from investing contributions

17

Superannuation/Pension uses of funds

- invested in wide range of assets, generally
long-term that are expected to deliver growth

18

features of a hedge fund

• Mainly for high-net worth individuals & institutional investors
• Specialise in strategies to try & achieve high returns
• Expectation they will achieve positive returns in both upward- &
downward-moving market
• Level of risk for investors much higher

19

Advantages of managed funds

1. Pooling of funds by small investors which  investment
activities on larger scale
2. Spread of risk/safety & diversification
3. Professional management have access to more info (big
advantage for the small investor).
4. In general, unit trusts can be bought & sold at short
notice (liquidity service) from fund manager (for unlisted)

20

disadvatages of managed funds

• Fund performance- managers don’t tend to outperform
market
• Governance issues
• Not much persistency in performance

21

life insurance company sources of funds

- offer contractual products e.g. whole of life, term
or endowment policies. Other insurance policies may be added on.

22

life insurance company uses of funds

- invest bulk of funds in L/T securities, to match their L/T liabilities