Explore the essential glossary of terms related to mutual funds structure and regulation in Canada, providing clear definitions and insights for financial professionals.
Understanding the structure and regulation of mutual funds is crucial for financial professionals navigating the Canadian investment landscape. This glossary provides clear definitions of key terms discussed in Chapter 17, aiding in comprehension and retention. Terms are presented in alphabetical order for easy reference.
A management style where the fund manager actively selects securities with the aim of outperforming benchmark indices. This approach involves frequent buying and selling of assets to capitalize on market inefficiencies.
A detailed report that provides comprehensive information about a mutual fund’s operations, holdings, and management. The AIF is a critical document for investors seeking in-depth knowledge about a fund’s structure and strategy.
Regulations designed to prevent the generation of income through illegal activities. AML policies are crucial for maintaining the integrity of financial markets and protecting investors.
A sales charge applied when mutual fund shares are redeemed, often decreasing the longer the investment is held. This fee structure incentivizes long-term investment by reducing costs over time.
Shares of large, well-established, and financially sound companies known for their reliability and stable performance. Blue-chip stocks are often included in mutual fund portfolios for their potential to provide steady returns.
Charges incurred when buying or selling mutual fund shares through a broker. These fees can impact the overall return on investment and should be considered when evaluating fund performance.
The process of a mutual fund repurchasing its own shares from investors at the Net Asset Value Per Share (NAVPS). This mechanism provides liquidity to investors wishing to exit their positions.
A financial institution responsible for safeguarding the mutual fund’s assets. The custodian plays a vital role in ensuring the security and proper management of the fund’s holdings.
Strategies used by fund managers to postpone or reduce tax liabilities. These mechanisms can enhance after-tax returns for investors, making them an important consideration in fund management.
A fee paid upon redemption of mutual fund shares, typically decreasing over time. This charge is similar to a back-end load and is designed to encourage long-term investment.
Selling mutual fund shares directly to investors without intermediaries. This approach can reduce costs and increase transparency for investors.
Payments made to shareholders from the income or gains generated by the mutual fund’s investments. Distributions can include dividends, interest, and capital gains.
A mutual fund where fees are based on assets under management rather than sales commissions. This structure aligns the interests of fund managers and investors by focusing on asset growth.
A plain-language document summarizing key information about a mutual fund to help investors make informed decisions. Fund Facts are designed to be easily understood and provide essential details about the fund’s objectives, risks, and costs.
The total annual fund operating expenses expressed as a percentage of average net assets. The MER is a critical metric for evaluating the cost-effectiveness of a mutual fund.
Investment vehicles that pool money from many investors to purchase a diversified portfolio of securities. Mutual funds offer investors access to professional management and diversification.
Regulations governing mutual fund prospectuses and disclosure documents. This instrument ensures that investors receive comprehensive and accurate information about mutual funds.
Regulations governing the distribution and advertising of mutual funds. These rules protect investors by ensuring fair and transparent marketing practices.
A mutual fund that does not charge any front-end or back-end sales loads. No-load funds can be an attractive option for cost-conscious investors.
A mutual fund structure where units are continuously issued and redeemed at NAVPS. This flexibility allows investors to enter and exit the fund at their convenience.
A management style aiming to replicate the performance of a specific market index. Passive management involves minimal trading and is often associated with lower fees.
A formal legal document providing details about the mutual fund’s objectives, fees, risks, and performance. The prospectus is a vital resource for investors conducting due diligence.
The price at which mutual fund shares can be sold back to the fund, based on NAVPS. The redemption price reflects the current value of the fund’s assets.
Self-Regulatory Organizations specific to regions or provinces that oversee mutual fund distribution. These bodies ensure compliance with local regulations and standards.
A centralized electronic system for registering mutual fund representatives in Canada. The NRD streamlines the registration process and maintains up-to-date records.
An individual investor who buys and sells securities for their personal account. Retail investors are a key demographic for mutual funds, seeking diversification and professional management.
The Canadian system for electronically filing securities-related documents. SEDAR provides public access to regulatory filings and enhances transparency in the financial markets.
An ongoing commission paid to mutual fund sales representatives based on the assets they manage. Trailer fees incentivize advisors to maintain client relationships and support fund growth.
An entity responsible for maintaining records of mutual fund shareholders and processing transactions. The transfer agent ensures accurate record-keeping and efficient transaction processing.
An investor who owns units of a mutual fund. Unitholders benefit from the fund’s investment strategy and share in its income and gains.
A graph that plots interest rates of bonds having equal credit quality but differing maturity dates. The yield curve is a valuable tool for assessing interest rate risk and economic conditions.
For further exploration of mutual funds and their regulation in Canada, consider the following resources:
Books:
Websites:
These resources provide additional insights and detailed explanations of mutual fund concepts, enhancing your understanding and application of the material covered in this chapter.
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