40 Questions
What happens to mutual fund assets during periods of economic downturn?
They decrease significantly
What do investors often do during periods of uncertainty and declining security prices?
Sell their investments to avoid further losses
What has happened to the economy since the 2002 and 2008 crises?
It has rebounded
What is a result of investors' returning confidence in the mutual fund industry?
Assets under management have climbed back up to pre-crisis levels
What type of mutual fund was first established?
Closed-end mutual fund
How do investors buy and sell units of a closed-end mutual fund?
Through a secondary market such as the Toronto Stock Exchange (TSX)
What happens to the number of units in a closed-end mutual fund after the IPO?
It remains fixed until more units are authorized and issued
Who is typically not involved in the buying and selling of units of a closed-end mutual fund?
The issuing company
Which sectors largely concentrate the Canadian market?
Energy, Finance, and Materials
What is the primary investment objective of international equity funds?
Long-term capital growth
How does the risk level of international equity funds compare to global equity funds?
Higher risk due to complete investment in foreign companies
Why are international equity funds more greatly impacted by currency, political, and economic risks?
They invest in foreign corporations
What risks can be magnified for international equity funds investing in emerging and developing countries?
Currency, political, and economic risks
In which regions do international equity funds primarily invest?
Outside North America
What diversification benefit do global equity funds provide to Canadian investors?
Broader diversification into different markets
Why are international equity funds considered higher risk investments?
Due to the currency, political, and economic risks associated with foreign investments
What is the main purpose of an index fund?
To replicate the return of a specific market index
In what mutual fund category would an index fund tracking the S&P/TSX Composite Index belong?
Equity
What is the term used to describe the difference between an index fund's return and the specific market index's return?
Tracking error
Why does an index fund's return tend to lag that of the specific market index?
Costs associated with managing the index fund
What may prevent an index fund from reproducing the identical basket of securities as the market index?
Costs associated with managing the fund
How does the risk classification of an index fund depend on?
The holdings in the fund portfolio
What type of index fund attempts to match the performance of the DEX Universe Federal Bond Index?
Fixed income fund
Why is an index fund's return unlikely to perfectly match the specific market index's return?
Presence of costs related to managing the index fund
What sets hedge funds apart from mutual funds in terms of manager evaluation?
Hedge fund managers are evaluated based on absolute returns.
Which type of investors are hedge funds typically available to?
Accredited investors
What kind of fees do hedge funds charge beyond the management fee?
Performance fee
Which type of funds have the objective of generating positive returns in all market conditions?
Hedge funds
What allows hedge funds to achieve high returns through amplified gains?
Leverage
What is a characteristic that differentiates hedge funds from mutual funds in terms of investment mandates?
Hedge funds have broad investment mandates.
Which type of investors benefit from economies of scale due to high minimum investment requirements?
Sophisticated investors
How do hedge funds differ from mutual funds in terms of filing requirements?
Hedge funds do not have to file a prospectus.
What is the primary reason for a portfolio manager to perform tactical asset allocation?
To take advantage of short-term opportunities in the market
In balanced funds, what is the usual strategy regarding tactical asset allocation?
Implement it as a short-term strategy and then return to strategic asset allocation
What type of income is usually generated by Balanced Funds?
Interest, dividends, and capital gains
How does the risk classification of Tactical Asset Allocation Funds generally compare to Balanced Funds?
Higher risk
What gives the portfolio manager of tactical asset allocation funds more flexibility compared to balanced funds?
No restrictions on asset allocation
What distinguishes tactical asset allocation funds from balanced funds in terms of their ability to adjust to market conditions?
Tactical asset allocation funds can change the asset allocation based on market conditions
What is the main purpose of rebalancing the assets in a mutual fund to its strategic allocation?
Maintain the desired asset mix
What characteristic distinguishes tactical asset allocation funds' investment objective from balanced funds?
Long-term capital growth and income with no restrictions on asset allocation
Test your knowledge on the impact of economic downturns on mutual fund assets and investor confidence, particularly during the 2002 internet bubble crash and the 2008 credit crisis. Learn how the mutual fund industry has rebounded since these periods of uncertainty.
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