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Questions and Answers
What types of investment companies are classified by the Investment Company Act of 1940?
What types of investment companies are classified by the Investment Company Act of 1940?
- Closed-end funds and open-end funds
- Mutual funds and ETFs
- Hedge funds and employer-sponsored retirement plans
- Unit investment trusts and managed investment companies (correct)
Who enforces and regulates the legislation in the Investment Company Act of 1940?
Who enforces and regulates the legislation in the Investment Company Act of 1940?
- Securities and Exchange Commission (SEC) (correct)
- Commodity Futures Trading Commission (CFTC)
- Federal Reserve System (FRS)
- Financial Industry Regulatory Authority (FINRA)
What is the main purpose of the Investment Company Act of 1940?
What is the main purpose of the Investment Company Act of 1940?
- To regulate the stock market
- To set interest rates for investment companies
- To manage retirement plans for employees
- To provide investors with information about their investment objectives, investment policies, and financial condition (correct)
What do investment companies do with funds collected from multiple investors?
What do investment companies do with funds collected from multiple investors?
What is the purpose of 12b-1 charges in investment funds?
What is the purpose of 12b-1 charges in investment funds?
What is the SEC requirement related to fees in investment fund prospectuses?
What is the SEC requirement related to fees in investment fund prospectuses?
What is the tax status granted to mutual funds?
What is the tax status granted to mutual funds?
What is the gross return for a fund with a NAV of $10, 5% annual expenses, and 14% per share earnings for 2 years?
What is the gross return for a fund with a NAV of $10, 5% annual expenses, and 14% per share earnings for 2 years?
How do front-end load, back-end load, and annual expense ratio affect the gross return for an investor in a fund?
How do front-end load, back-end load, and annual expense ratio affect the gross return for an investor in a fund?
In a comparison between mutual funds with CDs, what return must a fund with a 3% front-end load and a 0.6% annual expense ratio earn to be a better investment than a CD?
In a comparison between mutual funds with CDs, what return must a fund with a 3% front-end load and a 0.6% annual expense ratio earn to be a better investment than a CD?
What are some advantages of mutual funds?
What are some advantages of mutual funds?
What is a characteristic of ETFs?
What is a characteristic of ETFs?
What is a key difference between mutual funds and hedge funds?
What is a key difference between mutual funds and hedge funds?
What type of securities do mutual funds and hedge funds typically invest in?
What type of securities do mutual funds and hedge funds typically invest in?
What is recommended for reviewing in the lecture concepts and terminology related to investment funds?
What is recommended for reviewing in the lecture concepts and terminology related to investment funds?
What is the median number of mutual funds owned by individuals in the US?
What is the median number of mutual funds owned by individuals in the US?
Which type of funds are sold at net asset value (NAV) to the sponsor and are bought and sold at the end of the day when NAV is calculated?
Which type of funds are sold at net asset value (NAV) to the sponsor and are bought and sold at the end of the day when NAV is calculated?
What is the typical range of front-end load fees paid when purchasing mutual fund shares?
What is the typical range of front-end load fees paid when purchasing mutual fund shares?
What has happened to trillions of dollars of cumulative cash flows over the last 10 years?
What has happened to trillions of dollars of cumulative cash flows over the last 10 years?
What is the typical range of back-end load fees incurred when selling mutual fund shares?
What is the typical range of back-end load fees incurred when selling mutual fund shares?
Where have the majority of mutual and ETF investments in the US been?
Where have the majority of mutual and ETF investments in the US been?
What has happened to the concentration of mutual fund and ETF assets managed by the largest fund complexes over time?
What has happened to the concentration of mutual fund and ETF assets managed by the largest fund complexes over time?
What is the typical range of operating expenses for mutual funds as a percentage of assets under management?
What is the typical range of operating expenses for mutual funds as a percentage of assets under management?
What has been the trend in the share of assets managed by the five largest firms from 2005 to 2022?
What has been the trend in the share of assets managed by the five largest firms from 2005 to 2022?
How many US-registered investment companies were offered by US financial services companies at year-end 2022?
How many US-registered investment companies were offered by US financial services companies at year-end 2022?
What percentage of households in the US are invested in mutual funds, mostly for retirement purposes?
What percentage of households in the US are invested in mutual funds, mostly for retirement purposes?
How many ETFs were there in the US at the end of 2023?
How many ETFs were there in the US at the end of 2023?
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Study Notes
US Investment Company Institute (ICI) Factbook 2023 Highlights
- At the end of 2023, US-registered investment companies held $28.9 trillion in total net assets, with the majority being held by mutual funds and ETFs.
- 71.7 million households, representing 120.5 million individuals in the US, own funds, with 54.7% of households invested in these funds, mostly for retirement purposes.
- The median number of mutual funds owned by individuals is 3, and in the US alone, there were over 8,763 mutual funds and 2,989 ETFs.
- The majority of mutual and ETF investments in the US were in domestic equity, bonds, international equity, and money market securities.
- Trillions of dollars of cumulative cash flows have been withdrawn from actively managed equity mutual funds and placed in index-based equity ETFs or mutual funds over the last 10 years.
- The number of investment companies offered by US financial services companies at year-end 2022 was 16,159, with the majority of investment company assets in equity funds.
- The concentration of mutual fund and ETF assets managed by the largest fund complexes has increased over time, with the share of assets managed by the five largest firms rising from 35% in 2005 to 55% in 2022.
- Open-end mutual funds are sold at net asset value (NAV) to the sponsor and are bought and sold at the end of the day when NAV is calculated, while closed-end funds are sold at a premium or discount to NAV to other investors.
- Common types of mutual funds include money market, equity, specialized sector, bond, distressed firm, value or growth firms, and international indexed funds.
- Front-end load fees, which are a commission or sales charge paid when purchasing mutual fund shares, typically range up to 6%, affecting the price paid by investors.
- Back-end load fees, incurred when selling mutual fund shares, typically range from 4-6% and may decrease with time, affecting the investor's payoff.
- Operating expenses for mutual funds, used to pay for administrative expenses and advisory fees, typically range between 0.2% and 2% of assets under management.
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