Investment fund

collective investment schemeinvestment fundsinvestment vehicle
A closed-end fund issues a limited number of shares (or units) in an initial public offering (or IPO) or through private placement. If shares are issued through an IPO, they are then traded on an exchange or directly through the fund manager to create a secondary market subject to market forces. If demand for the shares is high, they may trade at a premium to net asset value. If demand is low they may trade at a discount to net asset value. Further share (or unit) offerings may be made by the vehicle if demand is high although this may affect the share price.

Exchange-traded fund

ETFETFsexchange-traded funds
An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be ETFs, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively managed ETFs.


Investmentsinvestingcapital investment
Hedge fund. List of countries by gross fixed investment as percentage of GDP. List of economics topics. Market sentiment. Mortgage investment corporation. Rate of return. Socially responsible investing. Specialized investment fund. Technical analysis. Time value of money. Mutual Fund.


assetstotal assetstangible asset
See also adjusting entries. 1) Investments in securities such as bonds, common stock, or long-term notes. 2) Investments in fixed assets not used in operations (e.g., land held for sale). 3) Investments in special funds (e.g. sinking funds or pension funds). Liability (financial accounting). Trading account assets.


Traditional and alternative investments. Voting interest.

Outline of finance

List of finance topicsList of valuation topicsFinance
See also: #General concepts under Portfolio theory below. Active management. Efficient market hypothesis. Portfolio. Modern portfolio theory. Capital asset pricing model. Arbitrage pricing theory. Passive management. Index fund. Activist shareholder. Mutual fund. Open-end fund. Closed-end fund. List of mutual-fund families. Financial engineering. Long-Term Capital Management. Hedge fund. Hedge. 529 plan (college savings). Asset allocation. Asset location. Budget. Coverdell Education Savings Account (Coverdell ESAs, formerly known as Education IRAs). Credit and debt. Credit card. Debt consolidation. Mortgage loan. Continuous-repayment mortgage. Debit card. Direct deposit.

Private equity

private-equityequityPrivate equity investor
Later, public pension funds and university and other endowments became more significant sources of capital. For most institutional investors, private equity investments are made as part of a broad asset allocation that includes traditional assets (e.g., public equity and bonds) and other alternative assets (e.g., hedge funds, real estate, commodities). US, Canadian and European public and private pension schemes have invested in the asset class since the early 1980s to diversify away from their core holdings (public equity and fixed income).

Unit investment trust

UITsunit trustsunit-investment trusts
In U.S. financial law, a unit investment trust (UIT) is an exchange-traded mutual fund offering a fixed (unmanaged) portfolio of securities having a definite life. Unlike open-end and closed-end investment companies, a UIT has no board of directors. A UIT is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and is classified as an investment company. UITs are assembled by a sponsor and sold through brokerage firms to investors. A UIT portfolio may contain one of several different types of securities. The two main types are stock (equity) trusts and bond (fixed-income) trusts.

Investment banking

investment bankinvestment bankerinvestment banks
Prime brokerage with hedge funds has been an especially profitable business, as well as risky, as seen in the bank run with Bear Stearns in 2008. Investment management is the professional management of various securities (stocks, bonds, etc.) and other assets (e.g., real estate), to meet specified investment goals for the benefit of investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via investment funds e.g., mutual funds).

Security (finance)

securitiessecuritydebt securities
Commonly, commercial banks, investment banks, government agencies and other institutional investors such as mutual funds are significant collateral takers as well as providers. In addition, private parties may utilize stocks or other securities as collateral for portfolio loans in securities lending scenarios.

Unit trust

unit trusts
There are a number of collective investment schemes — Unit Trust, Open-ended investment company, Mutual fund, Unit investment trust, Closed-end fund — with similar objectives and/or names, sometimes confused with each other. Variations include open-ended and closed-ended, business trust or management company/corporate structure, Actively managed or un-managed. In the UK there are generally two types of open-ended, actively managed investment companies: In Western Europe there are In the United States Unit trusts are open-ended; the fund is equitably divided into units which vary in price in direct proportion to the variation in value of the fund's net asset value.

Assets under management

AUMassetsfunds under management
Conversely, AUM are reduced by negative investment performance, as well as redemptions or withdrawals, including fund closures, client defections and other generally adverse events. Lower AUM tend to result in lower fees generated. Assets under management includes: For example, if fund managers contribute $2B of their own capital to the fund and raise additional $10B from investors, their AUM is $12B. * Net asset value Capital raised from investors. Capital belonging to the principals of the fund management firm. Fund Management Activities Survey 2005. Sovereign Wealth Fund Assets Under Management.

Open-end fund

open-endedopen-endopen-ended funds
Not all fund have initial charges; if there are no such charges levied, the fund is "no-load" (US). These charges may represent profit for the fund manager or go back into the fund. Most open-end funds are actively managed, meaning that a portfolio manager picks the securities to buy, although index funds are now growing in popularity. Index funds are open-end funds that attempt to replicate an index, such as the S&P 500, and therefore do not allow the manager to actively choose securities to buy. The price per share, or NAV (net asset value), is calculated by dividing the fund's assets minus liabilities by the number of shares outstanding.

Valuation (finance)

valuationinvestment analysisvaluations
Investment management. Lipper average. Market-based valuation. Paper valuation. Patent valuation. Present value. Pricing. Real estate appraisal. Stock valuation. Price discovery. Real options valuation. Technical analysis. Terminal value. Enterprise value. Sum-of-the-parts analysis. Minority discount. Control premium. Specific pricing models. Capital asset pricing model. Arbitrage pricing theory. Black–Scholes (for options). Fuzzy pay-off method for real option valuation. Single-index model. Markov switching multifractal. Multiple factor models. Chepakovich valuation model.


Managing these portfolio risks is most often accomplished using asset allocation, which seeks to diversify investment risk and opportunity. This asset allocation will prescribe a percentage allocation to be invested in stocks (either preferred stock or common stock), bonds (for example mutual bonds or government bonds, or corporate bonds), cash and alternative investments. The allocation should also take into consideration the personal risk profile of every investor, since risk attitudes vary from person to person. 5) Retirement planning is the process of understanding how much it costs to live at retirement, and coming up with a plan to distribute assets to meet any income shortfall.

Diversification (finance)

The argument is often made that time reduces variance in a portfolio: a "time diversification". A common phrasing: "At your young age, you have enough time to recover from any dips in the market, so you can safely ignore bonds and go with an all stock retirement portfolio." As John Norstad explains: "This kind of statement makes the implicit assumption that given enough time good returns will cancel out any possible bad returns.

Index fund

Index investingindex fundsindex
Style drift occurs when actively managed mutual funds go outside of their described style (i.e., mid-cap value, large cap income, etc.) to increase returns. Such drift hurts portfolios that are built with diversification as a high priority. Drifting into other styles could reduce the overall portfolio's diversity and subsequently increase risk. With an index fund, this drift is not possible and accurate diversification of a portfolio is increased. Index funds must periodically "rebalance" or adjust their portfolios to match the new prices and market capitalization of the underlying securities in the stock or other indexes that they track.

Long-Term Capital Management

Long Term Capital ManagementLTCMLong Term
Meriwether chose to start a hedge fund to avoid the financial regulation imposed on more traditional investment vehicles, such as mutual funds, as established by the Investment Company Act of 1940—funds which accepted stakes from 100 or fewer individuals with more than $1 million in net worth each were exempt from most of the regulations that bound other investment companies. In late 1993, Meriwether approached several "high-net-worth individuals" in an effort to secure start-up capital for Long-Term Capital Management.

AQR Capital

AQR Capital ManagementJohn M. LiewJohn Liew
While still working on his dissertation, which focused on momentum and value, Asness joined Goldman Sachs, where he was asked to lead a new quantitative research team within the firm’s asset management division. Liew and Krail joined him, and the new team applied what they learned in academia to manage both hedge-fund and long-only assets. In 1998, Asness, David Kabiller, Krail and Liew left Goldman Sachs to establish AQR. AQR was among the first hedge fund managers to voluntarily register at its inception with the Securities and Exchange Commission. The firm’s first product was a hedge fund, though it soon (2000) entered into traditional portfolio management.

Fund administration

fund administratorFund Administratorshedge fund administration
Supervision of the orderly liquidation and dissolution of the fund (if required). Gathering assets (i.e., seeking additional investors into the fund). Asset management (i.e., deciding how to spend the money that investors have put into the fund in order to obtain the best return for that investment). Fund governance. Investment management. Hedge fund.

Madoff investment scandal

Madoff scandalMadoff fraudBernard L. Madoff Investment Securities LLC
He sent out account statements by mail, unlike most hedge funds, which email statements. Madoff also operated as a broker-dealer, running an asset management division. In 2003, Joe Aaron, a hedge-fund professional, believed the structure suspicious and warned a colleague to avoid investing in the fund, "Why would a good businessman work his magic for pennies on the dollar?" he concluded.

Goldman Sachs

Goldman Sachs InternationalGoldman, Sachs & Co.Goldman Sachs Group
In 1986, the firm formed Goldman Sachs Asset Management, which manages the majority of its mutual funds and hedge funds today. In the same year, the firm also underwrote the IPO of Microsoft, advised General Electric on its acquisition of RCA and joined the London and Tokyo stock exchanges. 1986 also was the year when Goldman became the first United States bank to rank in the top 10 of mergers and acquisitions in the United Kingdom. During the 1980s the firm became the first bank to distribute its investment research electronically and created the first public offering of original issue deep-discount bond.

Derivative (finance)

derivativesderivativefinancial derivatives
The arbitrage-free price for a derivatives contract can be complex, and there are many different variables to consider. Arbitrage-free pricing is a central topic of financial mathematics. For futures/forwards the arbitrage free price is relatively straightforward, involving the price of the underlying together with the cost of carry (income received less interest costs), although there can be complexities. However, for options and more complex derivatives, pricing involves developing a complex pricing model: understanding the stochastic process of the price of the underlying asset is often crucial.

JPMorgan Chase

JP MorganJP Morgan ChaseJPMorgan
Morgan & Co., the asset management arm of the bank has US$2.988 trillion in assets under management, while its investment and corporate bank arm holds US$25.45 trillion in assets under custody. At US$45.0 billion in assets under management, the hedge fund unit of JPMorgan Chase is the third largest hedge fund in the world. JPMorgan Chase, in its current structure, is the result of the combination of several large U.S. banking companies since 1996, including Chase Manhattan Bank, J.P. Morgan & Co., Bank One, Bear Stearns and Washington Mutual.

Distressed securities

distressed debtdistressedDistressed investments
The original loans were exchanged for Brady Bonds, dollar-denominated bonds issued in the original amount of the loans. Paul Singer's Elliott Associates, a New York-based hedge fund, purchased $20.7 million worth of defaulted loans made to Peru for a discounted price of $11.4 million. Elliott Associates, holding the only portion of Peru's debt remaining outside the restructure, sued Peru and won a $58 million settlement. Unable to pay the $58 million, Peru, continued to repay creditors that held Brady Bonds. Elliott filed an injunction to prevent Peru from paying off its restructured debt without also paying Elliott.