CAPM

CAPM - Unit Investment Trust Fund (UITF)
ASSET MANAGEMENT COMPANY (AMC), - also known as UITF,

- regulated by the BSP.
- is a business that manages client funds that are pooled - sells participation unit and its
together and invests them in a variety of assets, such as - price is based on Net Asset Value per Unit (NAVPU)
stocks, bonds, real estate, and other investments. Investors in RICs bear two types of costs:
Types of Asset Management Firms
- SHAREHOLDER FEE,
• Regulated investment companies “sales charge”, which is a “one-time” charge;
• Exchange traded funds
- ANNUAL FUND OPERATING EXPENSE,
• Separately managed accounts
“expense ratio”, which covers the fund’s expenses.
• Hedge funds
• Pension funds
Exchange traded fund (ETF)
Regulated investment companies (RICs) - is very similar to mutual funds and its structure is
comparable to open and close ended funds. The main
- are financial intermediaries that sell shares to the difference between mutual funds and ETF lies in the
public and invest those proceeds in a diversified place where it can be bought and the management of
portfolio of securities. Each share sold represents a its portfolio.
proportional interest in the portfolio of securities
managed by the RIC on behalf of its shareholders.
Types of Regulated Investment Companies
Open-Ended Funds
- mutual funds, numbers of fund shares are not
fixed.
- All new investments into the fund are purchased
at the NAV
- All redemptions (sale of the fund) or redeemed
from the fund are purchased at the NAV
-Mutual funds who sell shares
- Regulated by SEC
Hedge funds
Close-Ended Funds - engage in a variety of investment activities. They cater
to sophisticated investors and are not subject to the
- do not issue additional shares or redeem shares. - - the
regulations that apply to mutual funds geared toward
number of fund shares is fixed at the number sold at the
the general public. Fund managers are compensated on
issuance.
the basis of performance rather than as a fixed
- Investors who want to sell their shares or investors percentage of assets. “Performance funds” would be a
who want to buy shares must do so in the secondary more accurate description.
market where the shares are traded. Prices are based Hedge Funds uses the following strategies:
supply and demand. • Leverage
• Short selling
• In Close-ended funds the price of shares could • Derivatives
either be “Trading at a Discount” or “Trading at
a premium”
• Simultaneous buying and selling of related Private placement of securities
financial instruments to realize a profit from the Trading of securities
temporary misalignment of their prices. Mergers, acquisitions, and financial restructuring
Instead of investing directly in stocks or bonds, or advising
by means of alternatives such as mutual funds, ETFs, or Merchant banking
hedge funds, Securities finance and prime brokerage services
Asset management
SEPARATELY MANAGED ACCOUNTS
ASSET MANAGEMENT FIRMS offer individual and What is risk and return?
institutional investors the opportunity to invest in a Risk is a measure of the uncertainty surrounding the
separately managed account (called as INDIVIDUALLY return that an investment will earn or, more formally,
MANAGED ACCOUNT). the variability of returns associated with a given asset.
In such accounts, the investments selected by the Return is the amount of money that you can make from
asset manager are customized to the objectives of the an investment.
investor.
Systematic vs Unsystematic Risk
SEPARATELY MANAGED ACCOUNTS offer the Systematic Risk, sometimes referred to as market risk.
customers of an asset management an investment Is a risk that is inherent to the entire market.
vehicle that overcomes all the limitations of RICs, they Unsystematic Risk is also known as specific risk, are
are more expensive than RICs in terms of the fees risks that are unique to single company or industry.
charged. Investment Diversification is the action of investing in
to different types of investment to reduce or mitigate
PENSION FUNDS exposure to risk of losses.
A pension plan fund is established for the eventual
payment of retirement benefits. A plan sponsor is the The Concept of Risk and Return
entity that establishes the pension plan. “The higher the risk the higher the return, the lower
A plan sponsor can be: the risk the lower the return”.
- A private business entity on behalf of its employees.
- A federal, state, and local government on behalf of its Measurement of Returns
employees.
- A union on behalf of its members. Total Rate of Return is the total gain or loss experience
- An individual. from an investment over a given period of time.
rt = actual, expected, or required rate of return
TYPES OF PENSION FUNDS during period t
- Defined Benefit Plan - the plan sponsor agrees to Ct = cash (flow) received from the asset investment
make specified dollar payments to qualifying employees in the time period t - 1 to t
beginning at retirement Pt = price (value) of asset at time t
- Defined Contribution Plan - the plan sponsor is Pt-1 = price (value) of asset at time t - 1
responsible only for making specified contributions into
the plan on behalf of qualifying participants with the
amount that it must contribute often being either a
percentage of the employee’s salary and/or a
percentage of the employer’s profits.
Investment Banks - Functions

Public offering of securities

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CAPM - Unit Investment Trust Fund (UITF)

ASSET MANAGEMENT COMPANY (AMC), - also known as UITF,

Types of Regulated Investment Companies

Investment Banks - Functions

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