Mutual Fund Types and Structures Flashcards

Which type of mutual fund continuously issues and redeems units at the current net asset value per unit (NAVPU)?

Answer: Open-end fund

Open-end mutual funds continuously issue new units and redeem existing units at the daily calculated NAVPU.

A labour-sponsored investment fund (LSIF) is designed primarily to invest in:

Answer: Small and medium-sized businesses

LSIFs are structured to provide venture capital to small and medium-sized Canadian businesses and offer tax credits to investors.

What distinguishes a clone fund from a standard mutual fund?

Answer: It mirrors the performance of a foreign fund using derivatives

Clone funds replicate the returns of a foreign fund by using derivative contracts while technically remaining a Canadian fund.

Under a mutual fund trust structure, unitholders are treated as:

Answer: Beneficiaries of the trust

In a mutual fund trust, investors are beneficiaries who hold units representing their proportionate interest in the trust's assets.

Which of the following best describes a money market mutual fund?

Answer: It holds short-term, high-quality debt instruments to preserve capital

Money market funds invest in short-term, highly liquid instruments such as T-bills and commercial paper to maintain capital stability.

A fund-of-funds structure is one where:

Answer: A mutual fund invests its assets in units of other mutual funds

A fund-of-funds invests in a portfolio of other mutual funds rather than directly in securities, providing built-in diversification.

Which feature is unique to a closed-end fund compared to a standard open-end mutual fund?

Answer: Its units trade on a stock exchange at market prices

Closed-end funds issue a fixed number of units that trade on a stock exchange, and their market price may differ from NAVPU.