Mutual Fund Industry and Economic Downturns Quiz
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Questions and Answers

What happens to mutual fund assets during periods of economic downturn?

  • They become unstable but remain the same overall
  • They increase rapidly
  • They remain stable
  • They decrease significantly (correct)

    • What do investors often do during periods of uncertainty and declining security prices?

  • Diversify their investments
  • Sell their investments to avoid further losses (correct)
  • Buy more investments
  • Hold their investments

    • What has happened to the economy since the 2002 and 2008 crises?

  • It has rebounded (correct)
  • It has remained stable
  • It has declined further
  • It has stagnated

    • What is a result of investors' returning confidence in the mutual fund industry?

    <p>Assets under management have climbed back up to pre-crisis levels</p> Signup and view all the answers

    What type of mutual fund was first established?

    <p>Closed-end mutual fund</p> Signup and view all the answers

    How do investors buy and sell units of a closed-end mutual fund?

    <p>Through a secondary market such as the Toronto Stock Exchange (TSX)</p> Signup and view all the answers

    What happens to the number of units in a closed-end mutual fund after the IPO?

    <p>It remains fixed until more units are authorized and issued</p> Signup and view all the answers

    Who is typically not involved in the buying and selling of units of a closed-end mutual fund?

    <p>The issuing company</p> Signup and view all the answers

    Which sectors largely concentrate the Canadian market?

    <p>Energy, Finance, and Materials</p> Signup and view all the answers

    What is the primary investment objective of international equity funds?

    <p>Long-term capital growth</p> Signup and view all the answers

    How does the risk level of international equity funds compare to global equity funds?

    <p>Higher risk due to complete investment in foreign companies</p> Signup and view all the answers

    Why are international equity funds more greatly impacted by currency, political, and economic risks?

    <p>They invest in foreign corporations</p> Signup and view all the answers

    What risks can be magnified for international equity funds investing in emerging and developing countries?

    <p>Currency, political, and economic risks</p> Signup and view all the answers

    In which regions do international equity funds primarily invest?

    <p>Outside North America</p> Signup and view all the answers

    What diversification benefit do global equity funds provide to Canadian investors?

    <p>Broader diversification into different markets</p> Signup and view all the answers

    Why are international equity funds considered higher risk investments?

    <p>Due to the currency, political, and economic risks associated with foreign investments</p> Signup and view all the answers

    What is the main purpose of an index fund?

    <p>To replicate the return of a specific market index</p> Signup and view all the answers

    In what mutual fund category would an index fund tracking the S&P/TSX Composite Index belong?

    <p>Equity</p> Signup and view all the answers

    What is the term used to describe the difference between an index fund's return and the specific market index's return?

    <p>Tracking error</p> Signup and view all the answers

    Why does an index fund's return tend to lag that of the specific market index?

    <p>Costs associated with managing the index fund</p> Signup and view all the answers

    What may prevent an index fund from reproducing the identical basket of securities as the market index?

    <p>Costs associated with managing the fund</p> Signup and view all the answers

    How does the risk classification of an index fund depend on?

    <p>The holdings in the fund portfolio</p> Signup and view all the answers

    What type of index fund attempts to match the performance of the DEX Universe Federal Bond Index?

    <p>Fixed income fund</p> Signup and view all the answers

    Why is an index fund's return unlikely to perfectly match the specific market index's return?

    <p>Presence of costs related to managing the index fund</p> Signup and view all the answers

    What sets hedge funds apart from mutual funds in terms of manager evaluation?

    <p>Hedge fund managers are evaluated based on absolute returns.</p> Signup and view all the answers

    Which type of investors are hedge funds typically available to?

    <p>Accredited investors</p> Signup and view all the answers

    What kind of fees do hedge funds charge beyond the management fee?

    <p>Performance fee</p> Signup and view all the answers

    Which type of funds have the objective of generating positive returns in all market conditions?

    <p>Hedge funds</p> Signup and view all the answers

    What allows hedge funds to achieve high returns through amplified gains?

    <p>Leverage</p> Signup and view all the answers

    What is a characteristic that differentiates hedge funds from mutual funds in terms of investment mandates?

    <p>Hedge funds have broad investment mandates.</p> Signup and view all the answers

    Which type of investors benefit from economies of scale due to high minimum investment requirements?

    <p>Sophisticated investors</p> Signup and view all the answers

    How do hedge funds differ from mutual funds in terms of filing requirements?

    <p>Hedge funds do not have to file a prospectus.</p> Signup and view all the answers

    What is the primary reason for a portfolio manager to perform tactical asset allocation?

    <p>To take advantage of short-term opportunities in the market</p> Signup and view all the answers

    In balanced funds, what is the usual strategy regarding tactical asset allocation?

    <p>Implement it as a short-term strategy and then return to strategic asset allocation</p> Signup and view all the answers

    What type of income is usually generated by Balanced Funds?

    <p>Interest, dividends, and capital gains</p> Signup and view all the answers

    How does the risk classification of Tactical Asset Allocation Funds generally compare to Balanced Funds?

    <p>Higher risk</p> Signup and view all the answers

    What gives the portfolio manager of tactical asset allocation funds more flexibility compared to balanced funds?

    <p>No restrictions on asset allocation</p> Signup and view all the answers

    What distinguishes tactical asset allocation funds from balanced funds in terms of their ability to adjust to market conditions?

    <p>Tactical asset allocation funds can change the asset allocation based on market conditions</p> Signup and view all the answers

    What is the main purpose of rebalancing the assets in a mutual fund to its strategic allocation?

    <p>Maintain the desired asset mix</p> Signup and view all the answers

    What characteristic distinguishes tactical asset allocation funds' investment objective from balanced funds?

    <p>Long-term capital growth and income with no restrictions on asset allocation</p> Signup and view all the answers

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