• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/125

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

125 Cards in this Set

  • Front
  • Back
Fund management is the _________ investment (pooling) of _____ investor's funds.
Collective; retail.
The funds (______) belong to the ________ investors (contributors), who receive the investment returns less ____.
Investments; individual; fees.
The __________ ____ remains with the investors, because their ______ depend on those ______ by the fund manager which could be ____ than expected.
Investment risk; returns; achieved; less.
Collection of retail investor's funds and the allocation of these funds to collective funds is the ______ segment.
Retail.
The investment of funds in securities by portfolio managers is the ________ segment.
Wholesale.
Three main groups of schemes (retail segment) are - _________, ____ ____ ____ & ___ ________.
Superannuation; public unit trusts; life insurance.
____________ is the main vehicle for long-term saving. It invests _________ made during a person's working life for the purpose of establishing a _____ of ____ that provide the ________ with income in _________.
Superannuation; contributions; pool; assets; contributor; retirement.
Public unit trusts are the classic vehicle for ______ retail _________.
Classic; investment.
Life insurance collects ____ in the form of ________ for insurance policies, a _______ of which is invested prior to the payment of claims.
Funds; premiums; proportion.
___________ provides an income in __________ but it does not provide income ____________ during a person's ______ life in the event of disability or premature _______. ____ _________ serves this purpose.
Superannuation; retirement; protection; working; death; life insurance.
Investments of managed funds are mostly in _________ assets. The main asset classes are.. (six items)
Equities and listed units.

Interest-earning securities.

Cash and deposits.

Overseas assets.

Alternative investments.
___________ investments are forms of investment that use non-________ methods of investment or are investments in non_________ asset classes. e.g, infrastructure.
Alternative; traditional; traditional.
Superannuation is a ___-term savings _____ that aims to generate retirement income from _____________ made during a person's working life. It is __________ in Australia. Whereas ______ _____ ______ commit to pay a specific _____ (either as a lump sum or pension) to the retiree (based on the contributor's ____ prior to or at retirement).
Long; scheme; contributions; compulsory; defined benefit schemes; salary.
Impact of earnings - the ___________ sum depends much more on the rate of _____ than on the amount of __________s.
accumulated; return; contributions.
Impact of earnings - Compare the accumulated sum from contributions of $200 per month for 40 years with average returns of 6% and 9% p.a.
Sum (6%) = $200[(1.005)^(480) -1] / 0.005 = $398,298

Sum(9%) = $200[(1.0075)^(480) - 1) / 0.0075 = $936,264
Impact of earnings -
Monthly contributions = $200
Number of years = 40 years
Average returns of 6% p.a.
$200[(1.005)^(480)-1] / 0.005 = $398298

Monthly contribution*[(interest rate + 1) ^ payment periods] / interest rate = Accumulated sum
What is the formula for accumulated sums of an investment?
Monthly contribution*[(interest rate + 1) ^ payment periods] / interest rate = Accumulated sum
Asset class risk and returns - Equities and property securities are classified as ____ risk / ____ return assets or '______ assets'. Debt securities (_____ & _____) are ___ return / ___ risk or '_____ assets'.
High; high; growth; cash; bonds; low; low; defensive.
Average return and volatility of Australian shares?
10.4 & 14.8
Average return and volatility of overseas shares?
4.4 & 19.3
Average return and volatility of property securities?
8.3 & 19.3
Average return and volatility of Australian bonds?
7.2 & 3.6
Average return and volatility of Australian cash?
5.7 % 1.1
Returns earned depend on the ___ of assets in which the _____ are invested.
Mix; funds.
Most superannuation funds provide contributors with a ______. Most commonly - ______ portfolios comprise more ____ (domestic and _____) and property, smaller amounts of ______ assets. ______ portfolios hold a larger proportion of _______ assets and a lower proportion of _____ assets.
Choice; growth; equities; overseas; defensive; balanced; defensive; growth.
APRA registers and supervises funds under the following categories... (4 items)
Corporate - funds of large employers.
Industry - funds of employee groups or trade unions.
Public sector funds.
Retail funds - run by large fund managers for an employer or individual.
This is all run on a not-for-profit basis.
There are also many self-managed funds that are not regulated by APRA.
Studies show that retail schemes achieved _____ returns than other registered schemes due mainly to their _____ fees.
Lower; higher.
Registered funds have a ________ who ensures the investment manager allocates ______ according to each _________'s choice and the _____ ____ (f any).
Trustee; funds; contributor; trust deed.
Trustees have a _____ duty of ______.
Fiduciary; care.
A fiduciary (from Latin __________ meaning "(holding) in trust; from ____ meaning "faith", and ______, meaning "trust") is a _____ or _____ relationship of ____ between two or more ______. Typically a fiduciary _____ takes care of _____ for another person.
fiduciarius; fides; fiducia; legal; ethical; parties; prudently; money.
Generally, the investment manager will use _________ portfolio _______ to invest funds for a ________ asset class.
professional; managers; particular.
_____ _______ provide trustees with _____ on how to best carry out their duties.
Asset consultants; advice.
Insurance policies - these are ___-_______ policies that also perform the _____ of ______ function. ______ are paid for policies that make payments should an insured event occur.
Risk-transfer; flow; funds; premiums.
Insurance companies _____ in assets to ________ income and ______ as _______ to meet their future _______. Consequently they face ________ risk. Policies are designed to reduce the _____ posed by _____ hazard, _____ selection and ______ claims.
Invest; generate; serve; reserves; obligations; investment; risks; moral; adverse; fraudulent.
Most life policies are for a _____ ____ and make a ___ only in the event of the __________ death or _______ disability during their term. These policies are held mainly by ____________ funds to provide income to the __________'s beneficiary (in the case of death) or to the contributor (in the event of a permanent ________).
fixed term; payment; beneficiaries; permanent; superannuation; contributor's; disability.
General insurance - These are pure ____ policies that provide financial __________ if an ______ event occurs. Examples of general insurance are ____ and contents insurance, motor vehicle and ____-party insurance, professional _______, _______ insurance.
Risk; compensation; insured; house; third; indemnity; mortgage.
______ is used by general insurance companies to spread their payout risks.
Reinsurance.
Professional Indemnity Insurance NZ - When running a business, your primary ___ is to provide a positive __________ for your customers. However, there may come a time when somebody is ___________ with your services and incurs a ____ or some _______ as a result of choosing your company. Circumstances such as these can be quite costly as the client may ___ and demand __________ for what has occurred.
Aim; impression; dissatisfied; loss; damage; sue; compensation.
Public unit trusts - these are _____ regulated ______ investment schemes that raise funds by selling _____, which represent a _____ of their assets. The _____ funds are allocated by an ___________ manager to ____ specified by their _____ _____, subject to a trustee's ________. Trusts charge ____ - ____/____ fees and ongoing __________ fees (for their ___________ services and ____ costs).
ASIC; collective; units; share; pooled; investment; assets; trust deed; oversight; fees; entry/exit; management; investment; trading.
Benefits of public unit trusts - public unit trusts provide investors with.... (2 items)
1. Access to wholesale financial markets .
2. The expertise of professional portfolio managers.
Public unit trusts provide ______ by buying units from, and selling units to _____ at their _____ and _____ prices, from which they earn a spread.
Liquidity; investors; bid; offer.
Public unit trusts are usually established by ______ ___________ to earn _____
Financial institutions; fees.
Property trusts are _____ by financial institutions or _________ developers.
Established; property.
Property trusts are mostly _____ on the ___ to provide investors with _______.
Listed; ASX; liquidity.
Property trusts are usually '____-_____' meaning they have a set _______ of _____.
close-ended; number; units.
Property trust unit _____'s receive the _______'s revenues less ____.
Holders; property's; fees.
Property trusts use ____ funds, exposing unit holders to ______ _____ risk and _____ risk.
Debt; interest rate; funding.
Equity trusts invest in _____ listed on _____ exchanges.
Shares; major.
Equity trusts have a variety of ______ investments or ________s (______, balance, ______).
Specialised; objectives; income; growth.
Equity trusts are generally ____-ended.
Open.
Equity trusts are usually not _____.
Listed.
Cash management trusts _____ in ______ market securities and _____ deposits.
Invest; money; bank.
Hedge funds - In Australia these are ____ trusts (____ regulated) that seek _______ returns. They count as _________ investment schemes.
Unit; ASIC; superior; alternative.
Hedge funds - In Australia they use ___-traditional investment _______ and ____ levels of gearing.
Non; strategies; high.
Hedge funds - In Australia they must _______ investors of their investment ____s and ___s
Inform; plans; fees.
Australian hedge funds are not as ______________ as the US ____, most likely because they are ________ and available to ______ investors.
Aggressive; funds; regulated; retail.
Funds of hedge funds (____s) seek to _____ investor risk by _______ in a range of _____ funds. They _____ about one-_____ of hedge fund ______ in Australia, but _____ an additional set of ___s.
FOHFs; reduce; investing; hedge; manage; third; assets; impose; fees.
Hedge funds are responsible for only a ____ proportion of funds under ____________ in Australia.
Small; management.
Reported _____ on hedge funds can overstate actual ______ because of __________ bias.
Returns; returns; survivorship.
Survivorship bias is the tendency for mutual funds...
with poor performance to be dropped by mutual funds because of poor results or asset accumulation. Widespread in fund industry, results in an overestimation of the past returns of mutual funds. A mutual funds company's selection of funds today will include only successful in the past.
Many losing mutual funds are _________ and ________ into other funds to hide ____ _______________.
Closed; merged; poor performance.
USA hedge funds are _________ pooled investment schemes for ____-value investments. They use a ______ range of complex investment strategies. Their origins can be traced to a ____-____ strategy which aims to make profits both when prices are _____ and _____. They charge on-going __________ fees and __________-linked fees. The US hedge funds are very __________ seeking ____ returns and taking ____ risks.
Unregulated; large; wide; long-short; rising; falling; management; performance; aggressive; high; large.
Private equity funds are alternative investment schemes. They pool ____ large _____ investments in a _______ fund and use ____________ amounts of ____ to acquire _____. (a ________ buy out) for the purpose of __________ their financial performance and ____ it at a substantial profit. They funds are mostly formed by ________ equity fund managers who earn very __________ fees.
very; equity; private; substantial; debt; companies; leveraged; improving; sell; specialist; substantial.
Private equity funds - _________ funds are the main investors. They _________ lack ________ (are not listed). Returns are very _________. Activity has slowed down due to ___.
Superannuation; investments; liquidity; variable; GFC.
The benefits of fund management - for retail investors collective investment management provides... (4 items)
Access to wholesale investments

Economies of scale that lower transaction costs, such as research and trading commissions.

Diversified investments that lower risk for an expected rate of return.

Investment expertise.
For retail investors collective investment management provides access to ________ investments.
Wholesale
For retail investors collective investment management provides ______ of ____ that lowers _________ costs, such as _____ and _______ commissions.
economies; scale; transaction; research; trading.
For retail investors collective investment management provides __________ investments that lower ____ for an expected rate of _____.
Diversified; risk; return.
For retail investors collective investment management provides _______ expertise.
Investment.
Two main approaches to investment management are ____ or _____.
Accept; not.
Active investment management is not ________ with EMH. Seek to __________ the market through asset selection (______) and timing of trades (____ ____ ___ ____. Higher ____s.
Consistent; out-perform; mispricing; sell high buy low; costs.
Passive investment management is _________ with EMH. Aim to _________ the return on a __________ index. ______ costs.
Consistent; replicate; benchmark; lower.
Leveraged buyout (LBO). It is the ____________ of another _______ using a significant amount of _________ money (____s or loans). Often, the ____ of the company being acquired are used as _________ for the loans in addition to the _____ of the acquiring company.
Acquisition; company; borrowed; bonds; assets; collateral; assets.
The purpose of a leveraged buyout is to allow companies to make large _____________ without having to ______ a lot of ______.
Acquisitions; commit; capital.
In an LBO, there is usually a ratio of __% debt to __% equity. Because of this ____ debt/equity ratio, the bonds are usually not _____________ grade and are referred to as _____ bonds.
90%; 10%; high; investment; junk.
Leveraged buyouts have had a notorious history, especially in the _____s when several _______ buyouts led to the eventual ___________ of the acquired companies. This was mainly due to the fact that the _______ ratio was nearly ____% and the ________ payments were so large that the company's _______ cash flows were unable to meet the _________.
1980s; leverage; bankruptcy; leverage; 100%; interest; operating; obligation.
One of the largest LBOs on record was the acquisition of ____ Inc. in ____ by Kohlberg ____ Roberts % Co. (___), ____ & Co., and Merrill Lynch. The three companies paid around $__ billion for the acquisition.
HCA; 2006; Kravis; KKR; Bain; $33.
Index fund management is a ______ strategy and one where the ____ cost of operation allows it to ___________ the higher-cost, _____-management strategy alternative over the _____ run. (_________, 2000).
Simple; low; outperform; active; long; Gallagher.
Active management seeks to achieve _______ average returns - that is, higher than those of ______ managers. They need to be able to identify assets that are ____ or ____-_____. They buy the former and sell the latter.
Above; competing; under; over-valued.
There are two main methods of assessing asset value (active management) - _________ analysis and ______________ analysis.
Technical; fundamental.
Technical analysis examines _______ data (charts) to _______ future asset price movements.
Historical; predict.
Underlying technical analysis is the idea of persistent price ______ and cyclical price ________, which if identified, will reveal when to ____&____. Try to identify price _____, price _____ & _____ lines and __________ indicators.
Trends; patterns; buy; sell; channels; support; resistance; momentum.
Through technical analysis, evidence of ______ above-average returns is not strong - nonetheless it is ______ used in the investment industry.
Consistent; widely.
Sentiment-based strategies - ______ investors believe prices _____ _____ to move to their new ____ values following the release of new ___________. They would buy when a price began to _____, expecting the price will continue and vice-versa.
Momentum; take time; fair; information; rise.
Sentiment-based strategies - _________ investors (______) believe markets (______) overreact to good and bad news. They will ____ when prices fall (believing that they have fallen too much) and sell when prices ____ (assuming they have risen too much).
Contrarian; rational; irrational; buy; rise.
Fundamental analysis attempts to calculate an asset's value as the _______ ____ of its expected future payments. This is then ________ to the ______ price - ______ assets would be ____, underpriced _____ bought or retained.
Present value; compared; current; overpriced; sold; assets.
Fundamental _______ can include ______ & _______ analysis, ______ _________ analysis, and __________ cash-flow analysis.
Analysis; market & industry; financial statement; discounted.
Passive investment management and index funds - these managers form a _____ (an _____ fund) that _____ the returns achieved by a _________ index, such as the ______. They invest in assets in __________ to their role in that _____, or (to lower costs) hold ______ shares and accept a small ______ error in the portfolio's returns.
Portfolio; index; replicates; benchmark; ASX200; proportion; index; fewer; tracking.
Index funds earn _____ returns with ____ costs than _______-managed funds and in the ____ run achieve a ______ after-fees return.
Average; lower; actively; long; higher.
Investment management performance - the ____________ of fund managers should be ________ in terms of the _____ achieved given the _____ taken and _____________ made between managers of _______ in the same class (_____ v. bond).
Performance; assessed; returns; risk; comparisons; assets; equity; bond.
Investment management performance - but ____ ____ are unstable, and past ______ are not usually a ____ indicator of ______ returns - hence the need for ____ ______ agencies.
Past returns; returns; good; future; fund ratings.
Ratings of investment managers - _________ and S&P rate managers on the ______ of their ___________ risk and return history and a __________ assessment of the manager's abilities.
Morningstar; basis; quantitative; qualitative.
S&P use a ____-star rating scale, where _ stars indicates an ____________ of average returns, _ or _ of below average returns, or _ or _ of above _____ returns.
5; 3; expectation; 1; 2; 4;5; average,
Morningstar and S&P rates; it is ___ clear how useful they are at _________ future performance. The _________ of investment managers is ___ consistent over many years.
Not; predicting; performance; not.
Many studies provide evidence that _____ funds have achieved ____ after-fees returns than ______ managed funds. But sometimes an ____ manager can ________ for a number of years, or within a particular ____ class (such as investments in small companies).
Index; higher; actively; active; outperform; asset.
______ (1995) estimated that over a period of __ years, 70% of US fund managers were outperformed by the ______ index.
Malkiel; 25; S&P500.
Studies by Fortin and _________ (2002) in the US and ______ (2002) in Australia show that _____ managers outperform _____ funds in the sectors where _____ research is _____ prevalent, namely in the ____ firm sector and the __________ sector.
Michelson; Graham; active; index; market; less; small; international.
The switching (from poor performing managers to better-performing managers) dilemma - These findings pose a ______ dilemma for ____ managers when ______ funds to _______ managers.
Switching; fund; allocating; portfolio.
Switching may involve ____ and ____ fees.
Entry; exit.
Switching to last year's best five star investment manager may not achieve ____-____ performance this ____.
Five-star; year.
Superannuation funds manage _______ savings to build ____ that provide _______ incomes. The __________ sum is very sensitive to ____ achieved.
Lifelong; assets; retirement; accumulated; returns.
Insurance policies are ___________ that make a ____- payment only when the insured ____ occurs.
Contracts; future; event.
Public unit trusts (_____ and ______) are the main ________- investment vehicles, although hedge _____ and private _____ funds have attracted a ____ deal of ______.
Listed; unlisted; collective; funds; equity; great; attention.
___________ investment management provide individual investors with __________ opportunities they can not ______ as an individual investor. _______ and _______ investment are the two main approaches to _________ investment.
Collective; active; passive; collective.
Investment _____________ should be _______ on returns performance subject to the _____ taken. Ratings ________ also assess the ______ of investment management firms. Data on past performance suggest _____ funds generally out-perform _____ managers, but not always and good managers may not _____ their performance over the long-run.
Performance; assessed; risks; agencies; abilities; index; active; sustain.
A number of areas of ______ investment can be made only in _________ amounts .
Direct; wholesale.
Funds management assists the ____ of ___ because it ____ retail investments so they can be invested in _______ amounts.
flow of funds; pools; wholesale.
Collective investment...
because of the pooling of retail investments.
At December 2009, superannuation accounts for...
63.4% of funds under management.
At December 2009, public unit trust accounts for....
19.4% of funds under management.
At December 2009, life insurance accounts for...
13.6% of funds under management.
At December 2009, other accounts for...
3.6% of funds under management.
Superannuation is a form of long-term savings that is encouraged by government through ___ _________ on their earnings and their ___-___s. The purpose is to generate assets that provide a worker with income in retirement. Most are _______ schemes with defined contributions, but the ___________ sum depends upon the investment earnings. The ________ of the fund is therefore composed of contributions over a person's working life and the continuous investment of these funds along with the ___________ of earnings. At retirement the contributor can use the accumulated sum to by an _____ to provide income in retirement, and the accumulated sum will start to ____.
tax concessions; pay-outs; accumulation, accumulated; structure; reinvestment; annuity; fall.
S= $400[(1 + 0.07/12)^40*12 - 1] / (0.07/12] =
$1,049,925.36
S=$400[(1 + 0.11/12)^40*12 - 1] / (0.11/12) =
$3,440,050.87
payment*(1 + interest rate/payments per month) ^ years * payments - 1 / interest rate / 12
Sum of accumulated funds
Insurance companies accept the risk of making payments to ____ ____ should insured events occur. They invest their ___ ________ income in assets that generate future earnings that are used to help meet _____ claims.
policy holders; net premium; future.
Public unit trusts pool retail investments and invest the funds _______. They improve the ____ of ____ because they provide investment _____________ not available if the investments were made __________, such as in ______ financial markets or _________ property.
Collectively; flow of funds; opportunities; individually; wholesale; commercial.
Active investment managers pursue a strategy of ____ and _______ in assets that will out-perform a benchmark index and selling assets that they believe will under-perform a ________ index.
Locating; investing; benchmarket.
Active investment managers constantly review their ______ of assets, _____ and ____ with the aim of out-performing a nominated benchmark index through ______ security selection and timing decisions.
Portfolio; adding and deleting; superior.
Active trading decisions are based upon...
either a technical or fundamental investment approach.
Technical analysis uses _____ _______ data to predict future price movements. Principles used are that prices follow _____ over long periods, price movements follow ______ patterns and research identifies these _____ and so indicate what to buy and sell.
Historical price; trends; cyclical; patterns.
Fundamental analysts will attempt to calculate an asset's ____ ____ as the present value of its expected ______ ____ _____ and compares this to current share price, selling overpriced securities and buying underpriced securities.
Fair value; future cash flows.
Passive managers do not attempt to make superior _____ selection and ______ decisions. The exact number they hold may be ________ (known as ______ ____________) to reduce their transaction costs (while tolerating a small _____ _____) so managers will decide what shares to leave out.
Stock; timing; minimised; portfolio optimisation; tracking error.
Problems for switching are....
that past superior performance does not guarantee superior future performance (likewise past poor performers can improve) and there are costs of switching like entry and exit fees.