金融市场与机构(第六版)教师手册M21_MISH1438_06_IM_C.pdf

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1、Chapter 21 The Mutual Fund Industry The Growth of Mutual Funds The First Mutual Funds Benefits of Mutual Funds Ownership of Mutual Funds Mutual Fund Structure Open-versus Closed-end Mutual Funds Organizational Structure Case:Calculating a Mutual Funds Net Asset Value Investment Objective Classes Equ

2、ity Funds Bond Funds Hybrid Funds Money Market Funds Index Funds Fee Structure of Investment Funds Regulation of Mutual Funds Hedge Funds Mini Case:The Long Term Capital Debacle Conflicts of Interest in the Mutual Fund Industry Sources of Conflicts of Interest Mutual Fund Abuses Conflicts of Interes

3、t:Many Mutual Funds Are Caught Ignoring Ethical Standard Government Response to Abuses Conflicts of Interest:SEC Survey Reports Mutual Fund Abuses Widespread Mutual funds have grown rapidly over the last two decades.Their growth has been partly fueled by increases in the number of investors who are

4、responsible for managing their own retirement.The increased liquidity and diversification they provide,among other factors,have also been important.There are currently over 8100 separate mutual funds with$7.1 trillion in net assets.Mutual funds can be organized as either open or closed end funds.Clo

5、sed end funds issue stock in the fund at an initial offering and do not accept additional funds.Most new funds are organized as open end funds and issue additional shares when new money is received.The net asset value(NAV)of the shares is computed each day.All trades conducted that day are at the NA

6、V.120 Mishkin/Eakins Financial Markets and Institutions,Sixth Edition The primary classes of mutual funds are stock funds,bond funds,hybrid funds,and money market funds.Stock and bond funds can be either actively managed by investment managers or can be structured as index funds that mimic the behav

7、ior of some index,such as the S&P 500.Hedge funds attempt to earn returns by trading on deviations between historical security relationships and current market conditions.These funds are not available to small investors.The mutual fund industry has been subject to widely publicized scandals for viol

8、ating SEC regulations and internal policy.Most abuses centered on market timing and late trading by investors receiving privileged treatment in exchange for large deposits with the funds.Conflicts of interest created by fee structures that reward investment managers more for total assets than for re

9、turns are partly responsible.Points to emphasize:Review Table 1,Figure 1,and Figure 6 in the context of the market decline in 2000.Discuss how the profitability of the market affects this industry.The case on page 543 discusses the calculation of the NAV.A useful exercise is to show how changes in m

10、arket values of the assets can change the NAV.Several homework problems are provided to let students practice computing NAV.The chapter details a number of recent high profile conflict of interest cases.These provide an excellent opportunity to address ethical issues faced by mutual fund managers.Di

11、scuss the motivations that lead to the abuses and alternative organizational structures that would reduce these problems.Include in the discussion the long term implication to the industry of continued conflict of interest abuse.1.Liquidity intermediation,denomination intermediation,ease of diversif

12、ication,cost advantages,and the growth of defined contribution pension plans.2.Liquidity intermediation is allowing investors to redeem their shares at any time,despite long-term holdings.3.You may be willing to pay fees for a mutual fund to provide liquidity intermediation,denomination intermediati

13、on,and lower the cost of diversification,but believers in an efficient market will not pay substantial fees for managers to select specific stocks.4.An open end mutual fund is continuously issuing new shares as new funds are received.A closed end fund only issues shares once.5.Investors have differe

14、nt objectives,goals,and tastes in securities.Mutual funds attempt to offer a selection of funds to attract as many dollars as possible.Each different fund will have some attribute that separates it from the others in the family.6.Index funds are not actively managed.They simply hold the stocks in th

15、e index.They usually have significantly lower fees than actively managed funds.7.A load fund charges a fee for accepting investments.The fees may be at the beginning of the investment or may be charged when the funds are withdrawn.8.A deferred load is a fee charged when money is withdrawn from a fun

16、d.They are usually 5%and fall by 1%for each year the investment is left in the account.Chapter 21 The Mutual Fund Industry 121 9.Hedge funds typically require very large investments,do not allow withdrawals,and charge very high fees.10.Money market interest rates rose in the late 1970s when bank int

17、erest rates were capped by Regulation Q.Investors traded the safety of banks for the high returns offered by MMMFs due to the types of securities they held.11.12b-1 fees pay the mutual fund for marketing and advertising.They are limited to 1%of the funds average net assets per year.12.Investment man

18、agers are usually compensated as a percentage of the funds under management.They have an incentive to increase total assets,even when this is done at the expense of shareholder return.13.Late trading is allowing investors to buy or sell shares in a fund after the 4:00 pm closing time when the fund N

19、AV is set.14.Market timing occurs when investors take advantage of time zones and the 4:00 pm NAV valuation to engage in arbitrage trading.15.Increased disclosure,more independent directors,hardening of the 4:00 pm closing time,and fees for early fund withdrawals.1.On January 1st,the shares and pric

20、es for a mutual fund at 4:00 pm are:Stock Shares owned Price 1 1,000$1.92 2 5,000$51.18 3 2,800$29.08 4 9,200$67.19 5 3,000$4.51 cash n.a.$5,353.40 Stock 3 announces record earnings,and the price of stock 3 jumps to$32.44 in after-market trading.If the fund(illegally)allows investors to buy at the c

21、urrent NAV,how many shares will$25,000 buy?If the fund waits until the price adjusts,how many shares can be purchased?What is the gain to such illegal trades?Assume 5,000 shares are outstanding.Solution:At 4:00 pm,the NAV is calculated as:$1,920$255,900$81,424$618,148$13,530$5,353.40NAV5,000$195.26/

22、share.$25,000 buys 128.034 shares.122 Mishkin/Eakins Financial Markets and Institutions,Sixth Edition Based on the new information,NAV is:$1,920$255,900$90,832$618,148$13,530$5,353.40NAV5,000$197.14/share.$25,000 buys 126.813 shares.If sale prices are used,the investor buys 128.034 shares.$25,000 en

23、ters the fund.After the price increase(assuming nothing else changes),the fund is worth$1,010,683.40.Each share is worth 1,010,683.40/5128.034$197.09.The investors shares are now worth$25,234.20,or a gain of$234.20.2.A mutual fund charges a 5%upfront load plus reports an expense ratio of 1.34%.If an

24、 investor plans on holding a fund for 30 years,what is the average annual fee,as a percent,paid by the investor?Solution:5%/30 0.1667%The expense ratio is an annual charge,so it remains 1.34%.The total fees paid are 1.34%0.1667%1.5067%.3.A mutual fund offers“A”shares which have a 5%upfront load and

25、an expense ratio of 0.76%.The fund also offers“B”shares which have a 3%backend load and an expense ratio of 0.87%.Which shares make more sense for an investor looking over an 18 year horizon?Solution:For the“A”shares,the average annual fee is 5%/18 0.76%1.0378%For the“B”shares,the average annual fee

26、 is 3%/18 0.87%1.0367%So,the investor is better off with the“B”shares.4.A mutual fund reported year-end total assets of$1,508 million and an expense ratio of 0.90%.What total fees is the fund charging each year?Solution:The fees are a percent of total assets.In this case,0.90%1,508 million$13,572,00

27、0.5.A$1 million fund is charging a back-end load of 1%,12b-1 fees of 1%,and an expense ratio of 1.9%.Prior to deducting expenses,what must the fund value be at the end of the year for investors to break even?Solution:With the backend load,the fund value must be(after expenses):$1 million/0.99$1,010,

28、101.01 The expense ratio typically includes 12b-1 fees.So,a total of 1.9%will be charged.So,before expenses,the fund value must be:1,010,101.01/0.981$1,029,664.64 6.On January 1st,a mutual fund has the following assets and prices at 4:00 p.m.:Stock Shares owned Price 1 1,000$1.97 2 5,000$48.26 3 1,0

29、00$26.44 4 10,000$67.49 5 3,000$2.59 Chapter 21 The Mutual Fund Industry 123 Calculate the net asset value(NAV)for the fund.Assume that 8,000 shares are outstanding for the fund.Solution:$1,970$241,300$26,440$674,900$7,770NAV$119.05/share8,000 7.An investor sends the fund a check for$50,000.If there

30、 is no front-end load,calculate the new number of shares and price/share.Assume the manager purchases 1,800 shares of stock 3,and the rest is held as cash.Solution:With the$50,000,the value of the fund is now$952,380 50,000$1,002,380.Shares are sold at a price of$119.05,or 420 new shares.There are n

31、ow 8,420 shares outstanding.The new fund looks like:Stock Shares owned Price 1 1,000$1.97 2 5,000$48.26 3 2,800$26.44 4 10,000$67.49 5 3,000$2.59 cash n.a.$2408 8.On January 2nd,the prices at 4:00 pm are:Stock Shares owned Price 1 1,000$2.03 2 5,000$51.37 3 2,800$29.08 4 10,000$67.19 5 3,000$4.42 ca

32、sh n.a.$2408 Calculate the net asset value(NAV)for the fund.Solution:$2,030$256,850$81,424$671,900$13,2602,408NAV$122.08/share8,420 9.Assume the new investor then sells the 420 shares.What is his profit?What is the annualized return?The fund sells 800 shares of stock#4 to raise the needed funds.Solu

33、tion:The 420 shares are worth 420 122.08 51,273.60,for a profit of 1,273.60.The one day return is 1,273.60/50,000 2.54%.Annualized,this is 637%in nominal terms,assuming 250 trading days.124 Mishkin/Eakins Financial Markets and Institutions,Sixth Edition The new fund is:Stock Shares owned Price 1 1,0

34、00$2.03 2 5,000$51.37 3 2,800$29.08 4 9,200$67.19 5 3,000$4.42 cash n.a.$4,886.40 10.To discourage short-term investing in its fund,the fund now charges a 5%upfront load and a 2%backend load.The same investor decides to put$50,000 back into the fund.Calculate the new number of shares outstanding.Ass

35、ume the fund manager buys back as many round-lot shares of stock#4 with the cash.Solution:With the upfront load,5%is charged as a commission.The actual funds invested are$50,000 0.95$47,500.This represents$47,500/122.08 389.09 new shares.The manager purchases 700 shares of stock 4.11.On January 3rd,

36、the prices at 4:00 pm are:Stock Shares owned Price 1 1,000$1.92 2 5,000$51.18 3 2,800$29.08 4 9,900$67.19 5 3,000$4.51 cash n.a.$5,353.40 Calculate the new NAV.Solution:$1,920$255,900$81,424$665,181$13,530$5,353.40NAV$121.98/share8,389.09 12.Unhappy with the results,the new investor then sells the 3

37、89.09 shares.What is his profit?What is the new fund value?Solution:The 389.09 shares are worth 389.09 121.98 47,461.20.This amount comes out of the fund,leaving the fund with$975,847.20.The investor must then pay the 2%back-end fee,leaving 47,461.20 0.98 46,511.98.This represents a loss of 3,488.02,mostly due to fees.