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Flashcards in Other Managed Products Deck (47)
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1

Percentage of net investment income that a REIT must distribute to avoid corporate taxation

90%

2

For a REIT, the minimum percentage of investment assets that must be invested in real estate

75%

3

The minimum percentage of gross income that a REIT must derive from rents or mortgage interest

75%

4

Where REIT shares can be purchased

OTC or on a stock exchange

5

Type of investment that passes through real estate income but not losses

REIT

6

Two investments that generate passive income

DPPs and REITs

7

Primary disadvantage of most limited partnership investments

Lack of liquidity

8

Unique tax advantage available to investors in limited partnerships

Pass through of losses

9

Type of income that passive losses generated from limited partnerships can shelter

Passive income only

10

Has active management responsibility and acts as agent for a limited partnership

General partner

11

Partner in a limited partnership that assumes unlimited liability for business losses and debts

General partner

12

Manages limited partnership day-to-day operations, potentially has unlimited liability

General partner

13

Silent partner in a limited partnership; has limited liability

Limited partner

14

Investment requirement and pass-through requirement for REITs to qualify for favorable tax treatment

75% of assets invested in real estate and 90% of income passed through to investors

15

Type of limited partnership that is exchange traded

Master limited partnership (MLP)

16

blind pool

A direct participation program that does not fully disclose to investors the investments that will be made.

17

direct participation program (DPP)

A business entity, such as a limited partnership, that passes through all gains and losses to its investors.

18

equity REIT

A type of REIT that owns income-producing real estate. Equity REITs� revenues typically come from rent on the property they own and from sales of the properties they hold.

19

exchange-traded note (ETN)

A structured product that combines an unsecured debt instrument with equity-market upside. Generally, these securities are principal protected, meaning that unless the issuer defaults, the investor will receive her investment back at maturity. In addition to return of principal, the investor�s payout will also be based on the return of an underlying equity security or market that the investment is tied to. These products tend to be extremely illiquid.

20

general partner

The active partner in a limited partnership. This partner manages the day-to-day operations. This role typically comes with personal liability for the debts of the partnership.

21

hedge fund

Typically organized as a limited partnership, it is a professionally managed investment vehicle available to high-net-worth individuals and institutions that uses aggressive trading strategies to generate outsized returns at the risk of heightened losses.

22

hybrid REIT

A type of REIT that combines the strategies of equity and mortgage REITs. They invest in both income-producing real estate and mortgages.

23

limited partnership (LP)

A type of direct participation program that includes general partners, who actively manage the business, and limited partners, who contribute capital, but are not involved in the daily operations of the business. These programs pass through gains and losses to investors.

24

limited partner

An investor in a limited partnership who contributes capital and from that point forward has a passive role in the business. Because this partner is not involved in the day-to-day management, this role comes with limited liability for the debts of the business.

25

limited liability

An investor�s potential financial loss is limited to a fixed amount. Equity holders, for example, can only lose the amount invested and cannot lose more than that.

26

local government investment pool (LGIP)

A type of municipal fund security that allows for pooled investment, similar to a mutual fund, but instead is used by state and local governments, rather than by individuals, to invest their cash.

27

lock-up period

A hedge fund provision that prohibits investors from making a withdrawal from the fund for a certain period of time. This can create illiquidity for investors, as their assets are stuck in the fund during the period.

28

master limited partnership (MLP)

A type of limited partnership that can be publicly traded on exchanges. Because they are exchange-traded, MLPs are more liquid than other direct participation program investments and thus are appropriate for a wider range of investors.

29

mortgage REIT

A type of REIT that invests in mortgages or mortgage-backed securities. Their reve-nues are generated primarily by the interest they earn on the mortgages they hold as well as the sales of these mortgages to other investors.

30

passive income

The earnings derived from a business in which the investor is not actively involved. Examples of entities that generate passive income are direct participation programs and REITs.