Pooled Investment. Close-Open end, Hedge, mutual fund, Asset-backed-securities

.     Pooled Investment

·         Are Mutual funds, Depositories, Trusts and Hedge Funds.

·         Shared ownership in the assets that these entities hold.

Pooled Investment	Created securities called by
Mutual funds	Share
Depositories	Depository receipt
Trusts	Units
Hedge Funds	Limited partnership interest

·         Benefit opportunity from pooled investment are not readily available on an individual basis.

·         May be open or close end fund

o   Open end fund: issue new share and redeem existing share on daily basis (usually). The price at which a fund redeem and sell the funds based on net asset value of fund’s portfolio which is difference between fund’s asset and liability. Normal choice of investees with mutual funds.

o   Close end fund: issued in primary market and not for sell back to the fund by demanding redemption but can trade in secondary market. Close end generally trade at discount or premium to net asset value. These discounts and premiums on closed end measures market sentiments.

o   Exchange traded funds (ETFs) and exchange traded notes (ETNs) are open ended funds tradable in secondary market. Authorized participants (Aps) has the option of trading directly with ETFs. Rare difference in between ETFs and net asset value.

o   ETFs permits only in-kind deposits and redemption. Buyers who buy directly from such a funds pay for their share with portfolio of securities rather than with cash and sellers receive portfolio securities. Generally similar or identical transactions are done. ETFs are depositories because of issuing depository receipt for the portfolio to traders then they use same receipt to trade in secondary market.

·         Asset backed securities: whose values and income payment are derived from pool assets (mortgage bonds, credit card debt, and car loan). These securities typically pass interest and principal payment received from pool asset through to their holders on monthly basis.

·         Hedge funds: generally organized in limited partnership. The hedge managers are partners. The limited partner are qualified and wealthy enough to bear losses. The requirement to participate in hedge funds and the regulatory restriction are vary jurisdiction. Most hedge fund follow single investment strategy but no single strategy characterized as a group. Hedge funds strategies are ranging from long-short arbitrage in the stock market to direct investment into exotic alternative asset.

Hedge funds are distinguished by their management compensation scheme. All funds pay their managers annual fee that is proportional to their asset and their performance fee that depend on wealth that generate for shareholders and second one is many hedge funds use leverage to increase risk exposure and to hopefully increase return.

·         Mutual Funds

o   Investment in portfolio of securities

o   Legally organized as investment trust and corporate investment companies