Types of Investment Funds Flashcards

Which investment fund structure is regulated under the Insurance Companies Act rather than provincial securities legislation?

Answer: Segregated fund

Segregated funds are insurance contracts governed by the Insurance Companies Act and provincial insurance legislation, not by securities regulators.

A global equity fund differs from an international equity fund primarily because:

Answer: A global fund can invest worldwide including Canada and the US, while an international fund typically excludes the investor's home country

A global equity fund includes all countries (including North America), whereas an international fund typically excludes the investor's home market.

An investor redeems mutual fund units before the fund's holding period expires and incurs a fee. This fee is called a:

Answer: Deferred sales charge (DSC) or redemption fee

A deferred sales charge (DSC) is a redemption fee paid by the investor when units are redeemed before the DSC schedule expires.

What is the primary purpose of a 'fund facts' document under Canadian regulations?

Answer: To give investors a concise, plain-language summary of key facts about a mutual fund before purchase

The Fund Facts document is a two-page plain-language summary required by Canadian regulators that must be delivered to investors before or at the point of sale.

Which of the following fund types is designed to profit in both rising AND falling markets?

Answer: Long/short hedge fund

Long/short hedge funds hold long positions in securities expected to rise and short positions in those expected to fall, allowing potential profits regardless of market direction.

A mutual fund that invests at least 90% of its assets in a single foreign country is best classified as a:

Answer: Country or regional fund

A country or regional fund concentrates its holdings in a specific nation or geographic area, exposing investors to that area's economic and political risks.

Under National Instrument 81-102, Canadian mutual funds are generally prohibited from:

Answer: Holding more than 10% of net assets in a single issuer's securities

NI 81-102 limits concentration risk by prohibiting standard mutual funds from investing more than 10% of net assets in securities of any single issuer.