When I wrote the exam I had more questions conceptually but not directly. It was more analytical. So I suggest you learn the concepts thoroughly to be applied to practical situations. Exercises are telling you how to apply the tcodes and
Hi I read the notes that you have had the CO exam , I plan to do soon. just wondering if you have any suggestions for the exam , such as if it is very valuable to do the exercises here, or what is the kinds of questions. thanks
Which of the following classify under Asset Management: Securities Commodoties Real Estate Currency Licenses Trademarks Patents Copyrights. In Securities Industry Asset Management Means Investment and Management of Financial Assets by Money Managers Investment of Financial Assets by Asset Managers Management of Financial Assets by Asset Managers Management of Securities and Money by Asset Managers Management of Securities by Investment Managers. Identify Proprietary Funds from below: Mutual Funds Pension Plans 401k Private Wealth Management Hedge Funds Emerging Market Funds Stock Funds Own Funds of Any corporation Institution Bank Treasury Management. Identify Public Investment Funds from below: Mutual Funds Pension Plans 401k Private Wealth Management Hedge Funds Emerging Market Funds Stock Funds Own Funds of Any corporation Institution Bank Treasury Management. Identify Special Funds from below: Mutual Funds Pension Plans 401k Private Wealth Management Hedge Funds Emerging Market Funds Stock Funds Own Funds of Any corporation Institution Bank Treasury Management. Identify the Assets classified based on the Nature of Investment from below: Mutual Funds Pension Plans 401k Private Wealth Management Hedge Funds Emerging Market Funds Stock Funds Own Funds of Any corporation Institution Bank Treasury Management. Objective of Asset Management is to Maximize returns for all assets and portfolio irrespective of the risk True False. Asset Management needs to meet regulatory, tax and liquidity requirements True False. Asset Management is responsibile for which all actors? Investors Shareholders Customers Asset Managers Trustees Corporate Board Regulator Central Authorities. Performance of an Asset Management Company is measured against?. Asset Management charges Remuneration as:. Asset Management Company is Managed by Investment/Fund Managers supported by:. An investment company is a Financial Intermediary that raises funds entirely by cash true false. Identify the advantages of a Mutual Fund Convenient Well Diversified Professional Fund management services at low cost Tax Efficient Ably Regulated Low Risk Not well regulated. Mutual Funds can decide which underlying security is bought or sold True false. Expenses like Marketting, Sales Loads, Management, etc...are born by the Asset Management Company False True. Identify the disadvantages of Mutual Funds Investment Barrier How Many can you buy? Continuous call on market Information Search Transaction Costs Risk Concentration A Certain Asset Class can have multiple levels or risk. Identify true statements about a Mutual fund More Stocks exposure for a given sum Sharing of risk Professional Support Research and information efficiency Ability to take part in private placement deals Transaction Cost Efficiency Risk diversification. Identify true statements about an Open Ended Fund: No Defined Life Issues & Redeems shares on demand - No limit to number of shares Transaction at NAV Life is Fixed Set No. Of shares that trade in an exchange Transactions at Market Price. Identify true statements about a Closed Ended Fund: No Defined Life Issues & Redeems shares on demand - No limit to number of shares Transaction at NAV Life is Fixed Set No. Of shares that trade in an exchange Transactions at Market Price. Stock vs Bonds is the follwoing type of fund: Closed vs Open Ended Growth vs Income Fund Index Funds Sector Funds. Mix of growth and income is following type of fund: Closed vs Open Ended Growth vs Income Fund Index Funds Sector Funds Balanced Funds.
Active vs Passive Management is following type of fund: Closed vs Open Ended Growth vs Income Fund Index Funds Sector Funds Balanced Funds.
Identify Utilities Under Sector Funds: AT&T Pacific Gas Consumer's Waters Chevron Pennzoil Noble Drilling Amex.
Identify Energy Companies Under Sector Funds: AT&T Pacific Gas Consumer's Waters Chevron Pennzoil Noble Drilling Amex.
Identify Financial Companies Under Sector Funds: AT&T Pacific Gas JPM Chevron Citi T Rowe Price Media and Telecommunications Amex. Retail, Technology, Consumer Durables and Health fall under which kind of funds? Index Funds Balanced Funds Closed Funds Sector Funds OPen Ended funds. Map the follwoing Types of Mutual Funds to their Correct Features & Risk - Return Equations: Large Cap Mid Cap Small Cap Micro Cap. Map the follwoing Types of Mutual Funds to their Correct Features & Risk - Return Equations: Large Cap Mid Cap Small Cap Micro Cap. Map the follwoing Types of Mutual Funds to their Correct Features & Risk - Return Equations: Large Cap Mid Cap Small Cap Micro Cap. Pension Funds have the following features. Choose the right answers: Sold to Corporate Matcing Contribution - Employer, Government 401k Tax Breaks PF Tax Break Start Ups < 1 Billion. Growth vs Value Funds is? Choose the right answer(s): Blend Funds Liquid Funds Muni Bonds Multi Funds Global Funds Real Estate Investment Trusts. Fund on Fund is? Choose the right answer(s): Blend Funds Liquid Funds Muni Bonds Multi Funds Global Funds Real Estate Investment Trusts. Fidelity Real Estate Investments is? Choose the right answer(s): Blend Funds Liquid Funds Muni Bonds Multi Funds Global Funds Real Estate Investment Trusts (REITs). Money Market Funds is? Choose the right answer(s): Blend Funds Liquid Funds Muni Bonds Multi Funds Global Funds Real Estate Investment Trusts (REITs). Best for Parking Money short term is? Choose the right answer(s): Blend Funds Liquid Funds Muni Bonds Multi Funds Global Funds Real Estate Investment Trusts (REITs). Bonds issued for building State or National Facilities that are tax exempt is? Choose the right answer(s): Blend Funds Liquid Funds Muni Bonds Multi Funds Global Funds Real Estate Investment Trusts (REITs) Municipal Bonds. Which of the following are Mutual Funds by Investment Objectives? Choose the right answer(s): Combined Funds Low Risk Funds Global Funds International Funds Country Specific Emerging Markets. Map the follwoing Types of Mutual Funds to their correct examples: Money Market Funds Muni Bond Emerging Markets Internaltional Funds Country Specific. Identify the main services offered by Mutual Fund Service Models: Arrival of NAV Fund Performance Liquidity Financial Information Financial Flexibility Savings Planning Risk Management Tax Efficiency Easy Operability Tax Filing. Identify the main Objectives of a Mutual Fund Service Model: Outsource Marketing, distribution and front end processing To primarily own set up for marketing, distribution and front end processing To concentrate on the asset management and corporate marketing but outsource distribution and processing to channels To become a financial Supermarket To offer a Variety of asset management related services To concentrate on asset management, corporate marketing and also own distribution and processing to channels. Map the follwoing services as a function to Investor or The Fund: Distribution MF Products Collection of Money Collection of Applications Marketing Services Share Operational Load. Map the following services as a function to Investor or The Fund: Provide Liquidity Handling Repurchase orders Account details of investors Pricing of Trades Pre and post Trade processing Maintain shareholders register adn accounting. Map the following services as a function to Investor or The Fund: Operational Support - Funding, Switching Fund Administration Information about MF company Wholesale Collection and Payment Services Credible distribution mechanism and Reach. Map the following services as a function to Investor or The Fund: Financial Advisory Services Market Information Complimentary Investor Services (Banking, Share trading). Identify the main responsibilities/properties of a Fund Distributor: Invest Funds assets on behalf of Shareholders Affiliated to fund company Distribute funds through own agents Distribute funds as a wholesaler - through other brokers Registered as a broker dealer Prepare Fund prospectus. It is the responsibility of a ___ to determine 'suitability' of sale to investors: Asset Manager Investment Advisor Fund Distributor Independent Director. ___ Holds exclusive right of selling shares as a 'Principal underwriter': Asset Manager Investment Advisor Fund Distributor Independent Director. Non Proprietary selling throughs brokers is mainly: Blended Funds Multi Funds Loaded Funds Closed Funds. What are the types of distribution channels: Direct Large Intermediate Intermediated. Fund Company directly sells to investor is a follwoing type of distribution channel: Pure Direct Bank Dealer Discount Brokerage. Direct distribution channel sells follwoing kinds of funds: No Load Funds Loaded Funds Closed Ended Funds. Supermarkets have the following features: Discount Brokerage & No taxation fees for customers Fee based package and No txn fees Discount Brokerage and Txn Fees to customers. Map the following to the correct type of distribution channel: Broker Dealers Banks Retiremanet Plans Financial Advisors, Wrap Programs Fidelity Vanguard Schwab. What is Load? Sales Commission Back End Sales Commission -Front End Deferred Sales Fee - Back End Deferred Sales Fee - Front end. What is Load? Sales Commission Back End Sales Commission -Front End or Deferred Sales Fee (Back End) Deferred Sales Fee - Front end or Sales Commission Back End Deferred Sales Fee - Front end or Sales Commission Front End. Redemption Fee is to Discourage Redemptions and operate for? Entire period of the Fund Long Life Period Short Life Period. Fee that is levied to manage Basic Fund Operations, Office Space, Brokerage etc.. .is called? Management Fee Taxes Administration Fee Load. Custody Fee, R & T Fee are part of which fee? Adminsitration Fee Taxes Management Fee Redemption Fee. Identify the Management Fee among the following: Advisors Fee Custody Fee R & T Fee Brokerage. Expense Ratio is? Expenses/Total Assets Total Asset/Expenses 1/Total Expenses. Higher the expense ratio better it is: True False. All mutual funds charge annual operating Expenses for: Management Research Trading Adminsitrative None of the above. Asset Management Fees is paid to AMC(Asset Management Company), is usually the largest component of the fees charged. It ranges from (As part of the funds managed): 1% - 3% 0.75% - 1.5% 1% - 2% 0.5% - 1.75%. US Rule 12b-1 fee is used to pay what kind of fees? Distribution Fees Marketting Fees Taxes Load. Maximum permissible Marketing fees charged anually is 0.5% of Avg Assets 0.7% of Avg Assets 0.75% of Avg Assets. Fee that gets deducted when the mutual fund shares are repurchased is called? It is also referred to as ____: Redemtion Fee Back End Load Deferred Sales Charge Pay back Fee. Identify the features of a No-Load Fund: Has Front End charge No Front end Charge No Back End Charge Has Back End Charge Sold Directly to investors Sold through brokers or the financial advisors. Identify true statements about Front End Load: They are also called Sales Charge Added to the sale price of an open mutual fund share Used to pay commission to Brokers/Agents Paid to the Asset Manager. Maximium Front end Load permissible is: 8.5% of NAV 2% of NAV 5% of NAV 0.75% of NAV. A, B or C Classes of a Mutual Fund denote? Represent differentiated ownership Differentiated ownership is based on parameters like specific time of entry Provide a different shareholder cost structures to the investors Each class denotes differentiated ownership but provided to the investor at the same cost. SEC Regulates: Investment Companies Brokers/Dealers. NASD Regulates: Investment Companies Brokers/Dealers. Fund prospectus and disclosure are only regulated by Investment Managers True False. Identify the specific requirements imposed for fund companies by 1940 Investment Company Act: NAV Reporting Fund Distribution Registration Capital Requirements Investment Objectives (Prospectus) Multi Class Shares. Rule 12b governs: Taxes Advertising Multi-Class Shares Distribution expenses. Rule 134/135A/482 governs: Taxes Advertising Multi-Class Shares Distribution expenses. Rule 18f-3 governs: Taxes Advertising Multi-Class Shares Distribution expenses. Match the following Asset Allocation Portfolio Realignment. Stock Picking is a _______ Strategy: Top Down Bottom-Up. Identify the correct Sequence for Asset Allocation:
1) Deploys Cash
2) Adopts Strategy (Top Down or Bottom-Up)
3) Fund Manager Sees Cash Position Everyday
4) Fund Manager decides initial Asset Allocation 4, 3,1,2 1,2,3,4 3,2,1,4 1,4,2,3. Fund Manager Sees Cash position: Once in two days Only at the time of Fund distribution Everyday. Invetment Manager Deploys cash true false. _____Keeps realigning the portfolio based on _____?. Portfolio Manager enters ___ into PMS. Traits needed by a Portfolio Manager are: Constant Monitoring Quick Thinking Relationships with Comany Management Quick access to Fund Distribution channels. Portfolio Analysis includes: Slicing and dicing the portfolio Risk-Return (Expected) Tradeoff Technical Analysis Research Evaluation. Match the following: Mean -Variance Analysis Own Analysis Models Sectoral Allocation Geographical Spread Asset Classes Optimal Combination of risk-return. Investment Research and Analysis consists of: Own Analysis Models Mean-Variace Analysis Fundamental Research Approach Technical Analysis Research Evaluation. Give the correct order of different activities in Order Management:
3) Block Trades
4) Order Generation
5) Notice of Execution (NOE) 4,3,1,2, 5 1,2,3,4,5 5,4,3,2,1 4,3,2,1,5. Match the compliance rules to correct classification: Market Regulator norms Stock-Exchange Broad Investment Objectives. Blacklists are complaince regulated at:. Adverse Price movement is which kind of risk? Market Risk Counterparty Risk Liquidity Risk Settlement Risk. If counterparty does not pay, what kind of risk is it? Credit Risk Counterparty Risk Liquidity Risk Settlement Risk. What kind of risk is it when you cannot enter or exit huge positions? Credit Risk Counterparty Risk Liquidity Risk Settlement Risk. Risk that involves cross border transactions is? Credit Risk Counterparty Risk Liquidity Risk Settlement Risk. Match the following: Barra Riskmetrics Standars and Poors Moody's Bloomberg Reuters Dow Jones Thomson. What are the important functions of Risk Management? Limit Monitoring Value at Risk Computationally intensive Buy Side Sell Side. Risk Management gets its data from: Reliable news and price sources Stock Exchanges Derivatives exchanges Brokers Dealers. Which is the risk model only for Debt? Barra Riskmetrics Standard and Poors Moodys. Fund and Asset Management Company are synomous True False. ________ is the key measure that helps in marketing and getting more Assets for Management. Identify the types of Performance Measurement Absolute Relative Floating High Risk. What is the measure of Absolute Performance?. _____ contribute to Performance and _______ helps keep the performance up: Securities, Portfolio Realignment Portfolio, Low Risk Large Portfolio, No Risk. Identify Investment Back-Office Activities Investment Operations Fund Accounting Securities Data Management Compliance Portfolio Analysis. Match the follwoing: Brokerage Average price of execution Trades/Positions with Brokers Cash with Brokers/Banks Securities Holdings with Custodials. Corporate Actions is part of which Back Office Process? Custodial Operations Securities Data Management Compliance Allocation. Identify Custodial Operations from below: Settle Cash /Securities Regulatory /Other Reporting Safe Keeping of Assets Depository Accounts Securities Lending Credit Lines Confirmation on Net Proceeds Allocation. Identify the services that can be contracted out: Research Services Transfer Agents Fund Accounting Custodial services Auditing Consulting and Legal Analytical and Rating Services None of the above. Match the functions of a Broker in his two roles: Intermediary for investing in Capital Markets Earn Brokerage fees from funds Sell fund Shares Other Services (Account Keeping, Distribution, etc) Earns Commissions: Front end, Trailing or Back end, 12-b Fees. Mutual Funds have very high Taxation True False. Resident Status is a tax impact on investor True False. Valuation Basis does not have a Tax Impact on the Investor True False. Flow through based on source of distributed income has an impact on Tax to Investors True False. Short Term gains tax rates are normally lower than the tax rate for long term capital gains False True. Six Month Conversion Rule States Loss incurred on MF Share sales will be considered to the extend of long term capital gain dividend Loss incurred on MF Share Sales has nothing to do with Long Term capital gain dividend Loss incurred on MF Share Sales will be considered as a Short Term loss Loss incurred on MF Share Sales is taxed at a flat Short term taxation rate. ______________ is an example of Clearing NSCC Participant. Industry Standard for processing and settling Mutual Fund Transactions is. FUND/SERV is a service offering of ___________. __________ sends simultaneous Net Settlement notifications for orders, disbursements to Brokerate firms/Clearing NSCC Participants and Fund houses/Transfer Agents. Retirement assets account for ________ of mutual fund investments 38% 45% 30% 8%. IRA's are offered by: Brokers Fund Houses Savings Institutions Asset Management Companies Banks. For an ________ individuals make tax deferred limited contributions, investing in securities including funds IRA 401K. ______ is sponsored by the employer who also decides the investment choise universe (in funds, shares, etc...) IRA Mutual Fund Hedge Fund 401k Plan. Investment Providers for 401k Plans are typically Savings Insitutions Banks Brokers Fund Houses. __________ requires specialized record keeping. Some times the record keeping is sold along with teh investment providing service. DC Plan Hedge Funds IRA Closed End Funds Open Ended Funds. Employee can do the following in a 401k Plan: Make Contribution Switch or Transfer Directs the Actual Investment Chose of his account Invest directly in Mutual Funds with the contribution. In ___________ plan employer can make matching contribution 401k IRA Hedge Fund Open Ended Funds. Investment Fund that charges Performance Fee and caters to limited investors is: Mutual Fund Hedge Fund Closed Fund IRA. There are approx _________ active hedge funds. Hedge funds have a lock up period of: 6 Months 2 Years 1 Year 5 Years. 1% of Assets Charged in 0.25% increments Quarterly is: Asset Management Fee Broker Fee Management Fee Performance Fee. 20% of profits charged annually is: Asset Management Fee Broker Fee Management Fee Performance Fee. Who all invests in Hedge Funds? Pension Funds Private Banks Insurance Companies High Net-worth Individuals (1Mn or more) Fund of Funds Retail Brokerage Firms Independent Financial Advisors Endowments and Foundations Dealers Banks. Hedge Funds Form Homogeneous Asset Class True False. If a particular fund was launched at a NAV of 100 which rose to 135 in its first year, a performance fee is payable on its 35% return. If the next year it gets dropped to 125, then: No Fee is payable 10% Fee is payable Cannot be said None of the above. If a particular fund was launched at a NAV of 100 which rose to 135 in its first year, a performance fee is payable on its 35% return. NAV rose to 125 in second year. If in its 3rd year the NAV rises to 140, a performance fee will be eligible to be paid as: No Fee is payable 10% Fee on return 35% fee on 140 35% fee on 5% return. Not charging Performance Fees by the fund until its annualized return is more than the benchmark rate (like T-Bills or a fixed percentage) Over a period of time is called: High Water Mark Hurdle Rate. _________ practice is not much in use now a days as the demand for the hedge funds has overtaken supply Hurdle Rates High Water Mark. Match the follwoing to their right Fund: May use derivates Manager, usually, does not invest own capital May indulge in short selling Relatively inflexible May use leverage extensively Aim to outperform known market benchmark Private investment vehicles. Match the follwoing to their right Fund: Manager paid a salary and bonus Large Minimum Investments Daily liquidity and redemption Restricted from Advertising SEC Registered Investment Vehicles Usually aim for absolute return objective LImited use of Leverate. Match the following correctly to their right fund: Flexibility in investment Strategies Maximum 30% of profits from short-sales May not use derivates Offered by private placement memo. Match the following correctly to their right fund: Liquidy varies from monthly to annually Small minimum investments Limited use of leverage Manager compensated on performance Manager invests own capital May freely advertise and promote Offered by prospectus. Write the correct order of the following Top - Down Approach Hedge Fund Investment Process:
1) Tactical/Strategic Asset Allocation
2) Style weightings
3) Portfolio Construction
4) Risk Management
5) Client Investment Objectives
6) Economic and Market Indicators 1,2,3,4,5,6 5,6,2,1,3,4 5,6,2,4,3,1 6,2,5,3,1,4. Write the correct order of the following Bottom-Up Approach Hedge Fund Investment Process:
1) "Approved" Funds
2) Creation of Funds
3) Quantitative/Qualitative Due-Diligence
4) Portfolio construction
5) Risk Management
6) Client Investment Objectives 1,2,3,4,5,6 6,3,1,2,4,5 5,6,2,4,3,1 6,2,5,3,1,4. Identify Owernership/Shareholding from the following Actors of Hedge Fund Offering: General Partner Investor (Limited Partner) Fund Administrator Custodian Hedge Fund Manager Registrar Transfer Agent. Identify Contractual Relationship from the following Actors of Hedge Fund Offering to the Hedge Fund: General Partner Investor (Limited Partner) Fund Administrator Custodian Hedge Fund Manager Registrar Transfer Agent Primer Broker/Dealer. One who executes the transactions ordered by the Hedge Fund Manager is called? Prime Broker/Dealer Custodian Transfer Agent Hedge Fund Manager. One who Sets and undertakes the investment strategies of the fund is called? Prime Broker/Dealer Custodian Transfer Agent Hedge Fund Manager. One who holds the assets of the fund monitors and controls flow of capital to meet margin calls is called? Prime Broker/Dealer Hedge Fund Manager Transfer Agent Custodian. One who does Record and Bookkeeping and independely verfies asset value of the fund is called? Fund Administrator Hedge Fund Manager Transfer Agent Custodian Registrar /Transfer Agent. One who Processes subscriptions and Redemptions for a Hedge Fund is called? Fund Administrator Hedge Fund Manager Transfer Agent Custodian Registrar /Transfer Agent. One who Maintains regsiter of shareholders of a Hedge Fund is called? Fund Administrator Hedge Fund Manager Transfer Agent Custodian Registrar /Transfer Agent. Hedge Fund investors can invest in a hedge fund only in cash True False. To pay a percentage of gains to the General Partner, the gains must be paid out of the Hedge Fund. This is done by: Performance Incentive Reallocation Liquidation Incentive Fees Performance Incentive. _______ facilitates the transacting process in situations where the trading partners woudl not otherwise transact with one another due to different levels of creditworthiness and the difference in dredit risk appetite Executing Broker Fund Manager Primer Broker Counterparty. _______ Facilitates access to financial markets to market participants who are less creditworthy Executing Broker Fund Manager Primer Broker Counterparty. _______ Allows market participants to execute the transactions in the their own name. Settlement of these transactions occurs in the name and also under teh responsibility of ________. Brokerages, Broker Fund Manager, Dealer Primer Brokerage, Prime Broker Counterparty, Transfer Agent. _______ Enables Credit Intermediation and anonymous trading Executing Broker Fund Manager Primer Broker Counterparty. Write down the correct sequence of setps in Hedge Fund Trading:
1) Prime Broker settles the trade with the Counterparty
2) Executing Broker "Give up" the trade
3) Fund Manager sends the order and a "Drop copy"
4) Prime Broker sends detailed reporting on all trades and positions
5) Executing Broker handles trade with the appropriate counterparty or trading Avenue 3,5,2,1,4 1,2,3,4,5 5,2,3,1,4. Generally, Prime brokers levy a charge for a bundled package service offering that they provide True False. _____________________ is charged in basis points on the value of the client loans, deposits, short sales adn synthetic financial products like Contrats for Difference and Swaps Spreads on Financing and Lending Trading commissions and fees Financing spreads Processing Fee. Prime Brokers Share credit lines with the Firm's Franchise Business is: Market Risk Operational Risk Liquidity Risk Reputational Risk. Managing exposure to highly leveraged clients (hedge funds) is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Establishing appropriate credit terms (VaR vs Initial Margin) is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Real time monitoring of liquidity within the terms of the Give-Up Agreement is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Lack of Standardized Give-Up Agreements is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Monitoring of Post Execution events (exercises, barriers...) is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Clients outsourcing operations is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Notification of the "Give-up" trade is primarily manual (Reuters and e-mail) is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Identifying incoming trades as Franchise or Prime Brokerage related is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Managing basis risk introduced by a client putting on option and NDF positions and taking off these positions with different executing brokers (pass through/non pass through) is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Resolving disputes between the client and executing broker is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Creating a "Chiness Wall" To segregate a Firm's Franchise adn Prime Brokerage Business (Client Confidentiality) is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Identifying off market trades is: Market Risk Operational Risk Liquidity Risk Reputational Risk Credit Risk. Reliance on Prime Broker to implement proper "Chinese Walls" segregating the clients portfolio from the Prime Broker's franchise business is: Market Risk Operational Risk Confidentiality risk Reputational Risk Credit Risk. Clients Put "all their eggse in one basket" is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. If the credit worthiness of the Prime Broker Deteriorates or the relationship terminates, the client may be faced with credit, liquidity and/or operational risks is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. Reconciliation of Portfolio with Prime Broker is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. Trade rejection by the Prime Broker is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. Monitoring of post execution events (exercises, barriers..) is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. Failure to notify the Prime Broker of trades in timely fashion is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. Reliance on the Prime Broker to properly match trades adn highlight discrepancies is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. Managing basis risk introduced by putting on and taking off option, derivative and positions with multiple brokers is: Market Risk Operational Risk Confidentiality risk Concentration Risk Credit Risk. Lack of Transparency is not an issue with Hedge Funds True False. Hedge Funds are a Conservative Invesetment Strategy True False. Lack of Understanding is some times a concern in Hedge Fund Investing True False. Hedge Funds charge low fees True False. Identify the primary concerns about investing with Hedge Fund: Liquidity Volatility Undefined Market Place Capacity None of the above. Match the common needs and goals to the three key components of Wealth Management: Give to charity Create a legacy for the children or other beneficiaries Send children/grandchildren to college Manage Income Taxes Transfer wealth during lifetime Manage Estate Taxes Manage Cash Flow. Match the common needs and goals to the three key components of Wealth Management: Seek Financial Security Save for Major Expense Revise Portfolio to reflect lifestyle changes Plan single Stock risk strategies Distribute estate to the designated beneficiaries at an appropriate manner at the appropriate time Over see retirement plan distributions. Match the common needs and goals to the three key components of Wealth Management: Obtain access to liquidity solutions Set aside for retirement Maximize employee/executive compensation Preserve income adn the assets in the event of disability or death Sell or preserve business interests. Match the WM Customer Segmentation to their right investment goals: Ultra High Net Worth High Net Worth Mass Affluent. Match the WM Customer Segmentation to their right investable assets: Ultra High Net Worth High Net Worth Mass Affluent. Match the WM Customer Segmentation to the Right Financial Firm they use: Ultra High Net Worth High Net Worth Mass Affluent. Which new products are bring considered by wealthy clients under Mass Affluent? Managed Accounts Exchanged Traded Funds Mutual Fund Wraps Hedge Funds Derivative Products Private Equity Tax Efficient Portfolios. Which new products are bring considered by wealthy clients under Ultra High Net worth or High Net worth? Managed Accounts Exchanged Traded Funds Mutual Fund Wraps Hedge Funds Derivative Products Private Equity Tax Efficient Portfolios. A Collective Investment Scheme witha fixed (Limited) quantity of shares is: Closed-End Fund Open End Fund Unit Investment Trust(UIT). Closed-End Fund - Shares are issued for subscription when the fund launches and is closed for redemption until liquidation True False. Closed-End Funds are not traded on an exchange True False. _________ Fund can redeem outstanding funds at any time at their current NAV Closed End Fund Open End Fund. UIT's are actively managed like a Mutual Fund True False. On Termination of a UIT, Investors receive the NAV + Dividends True False. ________ is similar to a closed ended Mutual Fund. How does an investor obtain returns from an MF Investment? 1) Capital Gains
2) Distributions from a Fund
- Capital Gains
3) Cash or Reinvestment Proceeds
- Reinvestment at NAV
4) Winding Up of a Fund. NAV does not apply to an ETF True False. ETF Shares the features of an Invetment Company, but it shares trade on the market like an equity True False. Fund shareholds elect ___________ to oversee the business affairs of the fund. Independent Public Accountant Board of Directors Investment Advisor Custodian. BoD is responsibile for selecting a responsible and competitive ___ to manage the investors money: Independent Public Accountant Fund Manager Investment Advisor Custodian. ___ ACt states that the Independent Directors must for the majority of the BoD of the company 1933 1934 1940. Independent Director should not have any relationship with the following: Mutual Fund Advisor Board of Director Transfer Agent Underwriter. _________ law requires mutual funds to appoint Independ Directors Indian American Eurpoean. ____________ Fee is capped at 2% by the SEC Exchange Fee Redemption Fee Management Fee Annual Account Maintenance Fee. When money from one fund is transferred to another fund within the same fund family, ____________ fee is charged Exchange Fee Redemption Fee Management Fee Annual Account Maintenance Fee. Cost of services to low balance accounts is covered through _________ fee Exchange Fee Redemption Fee Management Fee Annual Account Maintenance Fee. It shares similarities to a 401(k) (allows employer adn employee contributions), however with lesser contribution limites and cheap administration Roth IRA Traditional IRA Simple IRA Self-Directed IRA. The account holder is empowered to make decisions pertaining to the investments and make actual investments itself, on behalf of the retirement plan Roth IRA Traditional IRA Simple IRA Self-Directed IRA. A traditiona IRA is established in employee's name (instead of a pension account in the company's name) into which the employer makes contributions toward retirement plan Roth IRA Traditional IRA SEP IRA Self-Directed IRA. As opposed to traditional IRAs, here the contributions are made from post-tax assets. Also, all IRA transactions and withdrawals are free of taxes Roth IRA Traditional IRA SEP IRA Self-Directed IRA. Any earning within the IRA is not taxed, but retirement withdrawal are taxed llike any normal income. Contribution made for this are deductible for tax purposes (i.e. made from pre-tax assets) Roth IRA Traditional IRA SEP IRA Self-Directed IRA. _________funds uphold a predetermined risk level adn commonly use terms such as "conservative," "moderate," or "aggresive" in their names to point to the funds risk level LifeCycle Funds LifeStyle Funds. ____funds pursue a perdeterminated reallocation of risk ultimately to a specified target date, and usually rebalance their portfolios to develop into more conservative and income-generating by the target date, which is more often than not specified in the funds' name. LifeCycle Funds LifeStyle Funds. When there is excess demand for ETF shares, the trustee of the fund will create a creation Unit, by depositing with an authorized participant the specified portfolio of stocks used to track the index True False. If there are a greater number of ETF shares sold by investors, an authorized participant will decided to redeem ETF shares; it will do so by exchanging with the fund a redemption untit (a huge chunck or a block of ETF shares) for a portfolio of the stocks which are under teh fund's posession and used to track the index. True False. Match the differences between ETF and MF to their correct types: Traded on an exchange Not Traded on an exchange Bought Through Broker-Dealer Bought straight from Fund Company. Match the differences between ETF and MF to their correct types: NAV's are calculated at the end of Trading Day Share Price Varies through out the day Investors get Same Transaction price . Price at which investors trade ETF shares is identical to the NAV of the securities portfolio of the fund. True False. The prices at which ETF shares trade on the stock exchange are based on the forces of demand and supply. whend emand for ETF increases, the ETF's share price will shoot up, possibly exceeding the ETF's NAV. True False. ETF's are structured in a way so they are susceptable to large differences between their NAV and share price True False. Third Parties compute and disseminate every 15 seconds a measure frequently called the _____, which is a real time estimation of a fund's NAV. If ETF's share price is considerably above the IIV, institutional investors may find it lucrative to deliver teh suitable basket of securities to the ETF in exchange for their shares True False. If ETF's share price is considerably below IIV, institutional investors may find it beneficial to deliver suitable basket of securities to the ETF in exchange for their shares True False. Investors may find it advantageous to take a long position by buying the ETF's shares when ETF share prices is: < IIV > IIV. Both institutional and Retail investors may find it advantageous to go short on ETF's shares or opt for selling their holdings when ETF share prices is: < IIV > IIV. What is a mutual Fund? An assorted portfolio of assets management by an investment company on behalf of a set of investors possessing having varying risk models An assorted portfolio of assets management by an investment company on behalf of a set of investors possessing similar investment objectives An assorted portfolio of assets management by an investor on behalf of a set of underwriters possessing similar investment objectives. Objective of Asset Management is to Manage fund according to: Prospectus Corporate Guidelines Investment Objectives High NAV. List Acts that govern Mutual Funds securities act 1933 securities exchange act 1934 investment advisors act 1940 investment company act 1940 Investment act 1947. Fund Manager decides on initial asset allocation in adherence with ___? investment guidelines Corporate Rates Client Objectives High Performance. Performance measurement vendors are: Lipper Russel Thompson Reuters. ecurities Data Management Functions are: Price Hub Price Charts Corporate Security Master Static Data. NAV is Calculated as: ((Market value of securities) - (Non Capital Liabilities))/Outstanding Share Capital ((Market value of securities) - (Capital Liabilities))/Outstanding Liabilities ((Market value of securities) - (Capital Liabilities))/Total Market Value ((Net Asset Value) - (Capital Liabilities))/Total Market Value. Back Office Processes are: Allocation Confirmation of Net Proceeds Reconciliation Investment Operations Fund Accounting. What are the Uses of NAV Basis for Daily pricing For Loads For Management Fees Indicator of Fund Performance Performance Degradation Elevation of Assets. Functions of Fund Accounting Effect trades and Settlements Effect Capital Changes Record Corporate actions on underlying securities Record Expenses and fees Calculate NAV Effect Distribution announcements Reports Reconciliation Collection. Back-Office Compliance Functions: Pre/Post Trade Risk Management Collection Disbursements. Back Office Fund Account Functions Account for NAV Feeds for AMC Expenses borne by the fund Static Data Price Hub. Back-Office Investment Operations: Trade Confirmation Allocation reconciliation Custodial Interactions Bank Interaction Reinvestment Retirement. Which performance is bench marked against broad market indices? Relative Performance Absolute Performance. **What are the three Special Treament Tax Options to Investors? Wash Sale 6 month Conversion rule Sales loads basis deferral Yard Sale 9 Month Conversion Rule. Wash Sale has the following period: 30 60 90 120. FUND/SERV has two features key to its function: Customized to fund requirements Centralized Settlement Standard format for all funds Net to Net Trades. FUND/SERV: Centralizes Settlement - Supports: Multiple settlement cycles Payment thru Fed Funds Single Settlement Cycle Per fund Payment through Mucipal bonds. Identify Retirement Assets? IRA 401K 12b 134A. DC Stands for? Defined Contribution Plan Definite Control Plan Distinct Contribution Plan Defined Control Plan. Hedge Fund is composed of: Limited Partners & General Partners Objective partners Mixed Partners No Partners. General Partners: Invest Capital $2M to $5M Discretinary Powers Invest Capital $1M to $4M Invest Capital $3M to $5M. Limited Partners: Invest Capital $2M to $5M Discretinary Powers Invest Capital $1M to $4M Invest Capital $3M to $5M. For Investing in Hedge Funds, Private Limited Investment Partnerships are available to: Sophisticated Accredited Investors Microcap Sectors General Public Public Issuers. Hedge Funds is estimated to be $_____ to $_____ billion industry: 100 - 200 300 - 400 100 - 500 400 - 500. Hedge Fund industry is growing at a rate of ___ per year 10% 30% 40% 20%. In US Hedge Funds Only Serve _______ Public Issuers Accredited Investors Managers Consultants. The term ____ mainly helps in distinguishing Hedge Funds from well regulated retail investment funds and insurance companies Not necessarily hedge investments Contract Governing Arbritrage. Hedge Funds seek _____ by using _____ Strategies Above average returns, Aggressive and high-risk Average returns, Moderate risk Low returns, Low Risk Average returns, High-risk. Hedge Funds Primarily Reduce ________ Volatility Risk Credit Cost. Hedge Fund activities are defined and also bound by the terms of the _______ Contract Governing a particular fund Prospectus Investment Strategy Trading Strategies. List 4 Compensation Structure Elements of a Hedge Fund: Management Fee Performance Fee High-Water Mark Hurdle Rates Administration Fee Advisor Fee. Interested in assets that are mispriced compared to global alternatives is called: Global Macro Arbitrage Convertible Arbitrage Fixed Income Arbritrage. Seeking assets which have deviated from some anticipated relationship is called: Global Macro Arbitrage Convertible Arbitrage Fixed Income Arbritrage. Done between related bonds Global Macro Arbitrage Convertible Arbitrage Fixed Income Arbritrage. ________ is done between the securities whose prices suggest implying different probabilities for an event Global Macro Arbitrage Convertible Arbitrage Fixed Income Arbritrage Risk Arbitrage. _______ is between a derivate contract and the underlying security Global Macro Statistical Arbitrage Convertible Arbitrage Fixed Income Arbritrage Derivative Arbitrage. ___________ is a Generic Term that covers all hedged investment in equities Long/Short Equity Short Bias Equity Market Neutral Distressed securities. __________ is to emphasize or invest solely short Long/Short Equity Short Bias Equity Market Neutral Distressed securities. Companies/firms that are bankrupt or may become bankrupt Long/Short Equity Short Bias Distressed Securities Event Driven. Maintaining a balance between short and long positions Long/Short Equity Short Bias Equity Market Neutral Event Driven. ________________ aims to capitalize on a discrete happening like takeover, merger, etc... Long/Short Equity Short Bias Equity Market Neutral Event Driven. __________ is when Distressed Companies issuing securities Regulation D Short Bias Equity Market Neutral Event Driven. ______________ is between an acquiring and a target public company Regulation D Merger Arbitrage Equity Market Neutral Event Driven. __________ is typically non-equity related Regulation D Merger Arbitrage Alternative Event Driven. __________ seeks basis convergence from underlying future prices in options Regulation D Merger Arbitrage Alternative Options/Futures Convergence. ___________ generally receives both management fee and performance fee Fund Manager Financial Advisor Prime Broker Transfer Agent. Management Fee is calculated as a percentage of assetrs under Management. Typically 1.5% or 2.0% True False. ___________ is the Main Characteristic of Hedge Funds that allows sharing of positive returns with the investor Management Fees Performance Fees Administration Fees Transfer Fees. Performance fees is calculated as: Management + Transfer Fees Percentage of funds paper and realized profits % of Administration Fees = Transfer Fees. Performance Fees helps in aligning the interests of both: Investor and Fund Manager Prime Broker and Investor Fund Administrator and Prime broker External Broker and Investor. To avoid any undue risk taken by Manager, performance fees is limited by: High-Water Marks and Hurdle rates Management Fees Administration Fees Administration and Management Rates. When a fund manager decides to close the fund (where he lost money) and successfully persuades the investors to start fresh, high water marks prove to be unsuccessful in providing protection to the investors. This is termed as: High-Water Mark Hurdle Rate Loss carry-forward provision Carry-over provision. Purpose of High Water Mark is to: High Performance Fees Reduce Hurdle Rate Link Managers incentive with Investors interest Link Managers Performance with Hurdle Rates. Managers do not receive any incentive fees until the fund value exceeds the highest NAV it had previously achieved. This is called: Hurdle Rate High Water Mark. Who is the manager of the Hedge Fund? General Manager General Partner Limited Partner Comptroller.