tailieunhanh - Lecture Financial markets and institutions - Chapter 23: Mutual fund operations

This chapter includes content: Background on mutual funds, stock mutual fund categories, bond fund categories, growth and size of mutual funds, performance of mutual funds, mutual fund scandals. | Chapter 23 Mutual Fund Operations Financial Markets and Institutions, 7e, Jeff Madura Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved. Chapter Outline Background on mutual funds Stock mutual fund categories Bond fund categories Growth and size of mutual funds Performance of mutual funds Mutual fund scandals Chapter Outline (cont’d) Money market funds Hedge funds Real estate investment trusts Interaction with other financial institutions Use of financial markets Globalization through mutual funds Background on Mutual Funds Mutual funds: Serve as a financial intermediary by pooling investments by individual investors and using the funds to accommodate financing needs by governments and corporations in the primary market Frequently invest in securities in the secondary market Provide an important service for individuals who wish to invest funds and diversify Offer liquidity if they are willing to repurchase an investor’s shares upon request Offer various different services, such as transfers between funds and check-writing privileges Background on Mutual Funds (cont’d) A mutual fund hires portfolio managers to invest in a portfolio of securities that satisfies the desires of investors The portfolio composition is adjusted in response to changing economic conditions The board of directors: Monitors management Establishes procedures Ensures that the fund is properly serving its shareholders Under new SEC rules, a majority of board members must be outsiders Types of funds Open-end funds: Are open to investment from investors at any time Allow investors to purchase or redeem shares at any time Have a constantly changing number of shares Maintain some cash in case redemptions exceed investments Consist of many different categories to satisfy investors’ investment needs Background on Mutual Funds (cont’d) Types of funds (cont’d) Closed-end funds: Do not repurchase shares they sell Require investors to sell the shares | Chapter 23 Mutual Fund Operations Financial Markets and Institutions, 7e, Jeff Madura Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved. Chapter Outline Background on mutual funds Stock mutual fund categories Bond fund categories Growth and size of mutual funds Performance of mutual funds Mutual fund scandals Chapter Outline (cont’d) Money market funds Hedge funds Real estate investment trusts Interaction with other financial institutions Use of financial markets Globalization through mutual funds Background on Mutual Funds Mutual funds: Serve as a financial intermediary by pooling investments by individual investors and using the funds to accommodate financing needs by governments and corporations in the primary market Frequently invest in securities in the secondary market Provide an important service for individuals who wish to invest funds and diversify Offer liquidity if they are willing to repurchase an investor’s shares upon request .