Managed Products Overview
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Questions and Answers

What is required for a proposed annuitant to have their life insured?

  • A medical examination must be completed.
  • The proposed annuitant must consent in writing. (correct)
  • The contract holder must sign the policy.
  • The beneficiary must agree to the insurance.
  • Which statement accurately describes a revocable beneficiary designation?

  • It requires the beneficiary to have an insurable interest.
  • It cannot be changed without beneficiary consent.
  • It must be designated as irrevocable after the first year.
  • It allows the contract holder to revoke the beneficiary's rights. (correct)
  • What is the minimum maturity guarantee required by provincial legislation for segregated funds?

  • 100% of the amount invested if the contract term is 5 years.
  • 75% of the amount invested over a minimum 10-year term. (correct)
  • 50% of the amount invested over any contract term.
  • 100% of the amount invested with no term requirements.
  • Which of the following can be a beneficiary under a contract?

    <p>An organization such as a charity. (D)</p> Signup and view all the answers

    What characteristic is associated with segregated funds that increases the management expense ratio (MER)?

    <p>Full maturity protection after longer terms. (A)</p> Signup and view all the answers

    What percentage of maturity guarantee is typically associated with a 10-year holding period in segregated fund contracts?

    <p>75% (D)</p> Signup and view all the answers

    Which of the following statements accurately describes the reset dates for segregated fund contracts?

    <p>Reset dates can be established as frequently as daily. (C)</p> Signup and view all the answers

    What is one potential restriction insurers may impose for enhanced maturity guarantees?

    <p>The insured person must not be older than 80 when issued. (A)</p> Signup and view all the answers

    In a falling market, how does the maturity guarantee protect contract holders?

    <p>By resetting the contract to the previous high value. (C)</p> Signup and view all the answers

    What is the primary benefit of having a death benefit in segregated fund contracts?

    <p>It provides protection against market volatility at the time of death. (D)</p> Signup and view all the answers

    Which of the following accurately describes the relationship between death benefits and maturity guarantees in segregated funds?

    <p>Both death benefits and maturity guarantees can be 100%. (D)</p> Signup and view all the answers

    What determines the amount of death benefit payable at the time of death?

    <p>The net asset value of the fund minus fees at the time of death. (D)</p> Signup and view all the answers

    What is the maximum limit on illiquid assets for closed-end funds relative to their NAV?

    <p>25% (C)</p> Signup and view all the answers

    Which investment strategy is typically restricted in open-end funds but allowed in closed-end funds?

    <p>Short selling (C)</p> Signup and view all the answers

    Why might a portfolio of closed-end funds reduce risks associated with varying discounts?

    <p>They have a low degree of correlation with each other. (A)</p> Signup and view all the answers

    What is one advantage of closed-end funds over open-end funds regarding investment strategy?

    <p>They allow for long-term investment strategies without liquid asset reserves. (D)</p> Signup and view all the answers

    How are capital gains, dividends, and interest distributions typically managed in closed-end funds?

    <p>They are paid directly to investors. (A)</p> Signup and view all the answers

    What did the mutual fund modernization amendments to NI 81-102 achieve for closed-end funds?

    <p>Aligned their investment restrictions with alternative mutual funds. (B)</p> Signup and view all the answers

    What is the impact of a fixed number of units in a closed-end fund?

    <p>It allows for easier tracking of capital gains and other distributions. (C)</p> Signup and view all the answers

    Which statement best describes the liquidity requirements for closed-end funds compared to open-end funds?

    <p>Open-end funds must maintain liquidity for potential redemptions. (C)</p> Signup and view all the answers

    What condition allows existing closed-end funds to avoid the changes from the amendments?

    <p>They are grandfathered as long as they do not make another public offering. (D)</p> Signup and view all the answers

    What is a primary advantage of investing in a listed private equity company compared to traditional private equity investment?

    <p>Better access to capital and liquidity (B)</p> Signup and view all the answers

    Which of the following statements correctly describes the nature of a listed private equity firm's investments?

    <p>Their investments can include both publicly traded and privately held companies. (D)</p> Signup and view all the answers

    What transformation has occurred over the past decade concerning private equity companies?

    <p>A significant number of private equity firms have begun listing on stock exchanges. (C)</p> Signup and view all the answers

    Which financial market characteristic applies to shares of a listed private equity company?

    <p>They can be purchased and sold like shares of any other publicly traded company. (A)</p> Signup and view all the answers

    How does the structure of a listed private equity company typically differ from traditional private equity firms?

    <p>They must adhere to regulatory and reporting requirements as publicly traded entities. (A)</p> Signup and view all the answers

    In what ways can investors benefit from investing in a listed private equity company?

    <p>They gain access to exclusive investment opportunities unavailable to retail investors. (C)</p> Signup and view all the answers

    Which sector is NOT mentioned as part of ABC Corp's investment holdings?

    <p>Technology (D)</p> Signup and view all the answers

    Which of the following is a significant reason for the rise of listed private equity companies?

    <p>Improved liquidity and transparency in investment processes. (B)</p> Signup and view all the answers

    What describes ABC Corp's primary strategy in utilizing its capital?

    <p>Targeting small to mid-size privately held investment opportunities. (A)</p> Signup and view all the answers

    Flashcards

    Beneficiary

    The person(s) who will receive benefits from a contract after the annuitant dies.

    Revocable Designation

    A beneficiary designation that can be changed or canceled by the contract holder.

    Irrevocable Designation

    A beneficiary designation that cannot be changed without the beneficiary's consent.

    Maturity Guarantee (seg. funds)

    A promise that investors will receive at least a portion of their invested money (e.g., 75% or 100%).

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    Insurable Interest

    A financial or other benefit derived from a person's life or health.

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    Maturity Guarantee

    A guarantee of a specific portion of the investment's maturity value.

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    Death Benefit Guarantees

    A guaranteed payout to a beneficiary in case of death of the contract holder, minimum amount, excluding fees.

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    10-Year Term

    A period of 10 years for maturity guarantee contracts. Holding period for investment protection.

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    Guaranteed Maturity Amount

    The minimum amount guaranteed to be paid on maturity.

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    Age Restrictions

    Limitations on eligibility for enhanced guarantees based on the annuitant's age at the time of policy issuance.

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    Reset Dates (segregated funds)

    Dates when the maturity guarantee on segregated fund contracts are reset for another 10 years when the term expires.

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    Daily Reset

    Maturity guarantee recalculation done every day for a segregated fund to capture market gains or secure previous highs, locking in the value.

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    Closed-end Fund Modernization

    Amendments to NI 81-102 in 2018 brought closed-end funds under similar investment restrictions as alternative mutual funds, including leverage, short selling, derivatives, and portfolio concentration. However, closed-end funds have a higher allowance for illiquid assets compared to alternative mutual funds.

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    Closed-end Funds: Illiquid Asset Limit

    Closed-end funds are allowed to hold up to 20% of their net asset value (NAV) in illiquid assets, compared to 10% for alternative mutual funds. This limit can increase to 25% for a maximum of 90 days, compared to 15% for alternative mutual funds.

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    Closed-end Fund Diversification

    Investing in a portfolio of closed-end funds with low correlation can reduce overall risk. The different funds' discounts tend to offset each other, smoothing out potential negative effects.

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    Closed-end Funds: Investment Opportunities

    Closed-end funds provide opportunities for investment returns that may not be available in open-end funds, such as short selling.

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    Closed-end Funds: Higher Investment Level

    Closed-end funds typically have a higher level of investment compared to open-end funds because they don't need to keep a large percentage of their assets liquid for redemptions.

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    Closed-end Fund: Long-term Strategy

    Managers of closed-end funds have the flexibility to focus on long-term investment strategies without the need to reserve liquid assets for redemptions.

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    Closed-end Fund Distributions

    Capital gains, dividends, and interest distributions from closed-end funds are paid directly to investors, rather than reinvested in additional units, making it easier to track the adjusted cost base.

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    Listed Private Equity Company

    An investment company that trades on a stock exchange, using its capital to purchase or invest in other companies. These companies can be publicly traded or privately held.

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    Private Equity Firm

    A company that invests in private companies or assets, often with the goal of improving their performance and eventually selling them for a profit.

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    Diversification

    Spreading investments across different assets, industries, or companies to reduce risk.

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    What are the sectors of a private equity company's holdings?

    Examples include real estate, finance, healthcare, and many more. The specific industries will vary depending on the company's investment strategy.

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    Advantages of Investing in Listed Private Equity

    1. Better access to capital: More investors can participate.
    2. improved liquidity: Easier to buy and sell shares.
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    Disadvantages of Investing in Listed Private Equity

    While promising returns, it comes with inherent risks that could lead to losses. You should thoroughly research and understand the company's investment strategy.

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    Publicly Traded Companies

    Companies whose shares are bought and sold on a stock exchange.

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    Privately Held Companies

    Companies whose shares are not traded on a stock exchange and are typically owned by a limited number of people.

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    Regulatory and Reporting Requirements

    Rules and guidelines that publicly traded companies must follow, including financial disclosures and transparency.

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    Study Notes

    Other Managed Products

    • Additional types of managed products include their structure, characteristics, regulatory issues, and tax considerations
    • Learning objectives include describing the features and structure of segregated funds, comparing advantages and disadvantages of Labor-Sponsored Venture Capital Corporations, defining closed-end funds, differentiating among income trusts, and describing advantages, disadvantages, and processes for investing in private equity
    • Content areas include segregated funds, Labor-Sponsored Venture Capital Corporations, closed-end funds, income trusts, and listed private equity
    • Key terms are defined in the glossary and are bolded within the chapter
    • Key terms include allocation, insurable interest, interval funds, irrevocable designation, and segregated funds, among others

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    Related Documents

    CSC Volume 2 Chapter 10 PDF

    Description

    This quiz covers various types of managed products, focusing on their structures, characteristics, and regulatory issues. It includes topics such as segregated funds, Labor-Sponsored Venture Capital Corporations, and private equity. Test your understanding of key terms and the advantages and disadvantages of these investment vehicles.

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