CMFAS Collective Investment Schemes M3

Question 1

What is a collective investment scheme (CIS)?

Accepted Answer

A scheme where funds from multiple investors are pooled and professionally managed

Answer

A CIS pools money from many investors and invests it collectively according to a stated investment objective, managed by professional fund managers.

Question 2

Who manages the investments in a unit trust?

Accepted Answer

A professional fund manager

Answer

A professional fund manager is appointed to manage the investments of a unit trust, making buy and sell decisions on behalf of unitholders.

Question 3

What is the role of a trustee in a unit trust?

Accepted Answer

To safeguard the assets of the fund and protect unitholders' interests

Answer

The trustee holds the assets of the unit trust on behalf of unitholders, ensures compliance with the trust deed, and acts as a check on the fund manager.

Question 4

What is the difference between an open-ended and a closed-ended fund?

Accepted Answer

Open-ended funds continuously issue and redeem units; closed-ended funds have a fixed number of units

Answer

Open-ended funds create new units when investors buy in and cancel units when investors sell. Closed-ended funds have a fixed number of units traded on the exchange.

Question 5

What is the management fee in a unit trust?

Accepted Answer

An ongoing fee charged by the fund manager for managing the fund

Answer

The management fee is an ongoing annual charge (typically 0.5% to 2% of NAV) paid to the fund manager for their investment management services.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Collective Investment Schemes M3