Financial Markets and Institutions (2-downloads)

4. Hedge funds attempt to earn returns by trading on

deviations between historical security relationships

and current market conditions.

5. The mutual fund industry has been subject to widely

publicized scandals for violating SEC regulations and

internal policy. Most abuses centered on market tim-

ing 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 returns are partly responsible.

K E Y   T E R M S

closed-end funds, p. 494

deferred load, p. 501

diversification, p. 490

hedge funds, p. 503

load funds, p. 501

net asset value (NAV ), p. 495

no-load funds, p. 502

open-end fund, p. 494

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Chapter 20 The Mutual Fund Industry