Exam 19: Investment Companies

Why are there so many different mutual funds offered for sale? Why have index funds become more popular?

How do hedge funds take advantage of capital market inefficiencies and end up making the markets more efficient?

Unit investment trusts have a high security turnover rate, increasing their costs over equivalent mutual funds.

While closed end funds may trade at a discount, they never trade at a premium due to arbitrage.

How is the marketing channel of distribution different for load mutual funds vs. no-load funds?

Hedge funds have been popular diversification investments for small investors.

Compare and contrast an open-end (mutual fund) investment fund with a closed-end investment company.

Most hedge funds are not investment companies.

Closed end funds that trade at a value different than their NAV provide clear evidence of inefficient market pricing.

No-load mutual funds are commonly sold by security brokers and dealers.

One of the benefits of investing in hedge funds is that some hedge funds are not subject to taxation on fund distributions nor to U.S. estate taxes.

Hedge funds are typically organized as limited partnerships with the fund manager as the general partner.

Money market mutual funds are not subject to reserve requirements.

REIT activities are governed by the Investment Company Act of 1940.

Commodity ETFs are not investment companies.