Mutual funds and other investment companies - Types of investment companies
3 important questions on Mutual funds and other investment companies - Types of investment companies
What are closed-end funds?
Closed-end funds do not redeem or issue shares. Investors in closed-end funds who wish to cash out must sell their shares to other inves- tors. Shares of closed-end funds are traded on organized exchanges and can be purchased through brokers just like other common stock; their prices, therefore, can differ from NAV.
What are commingled funds?
Commingled funds are partnerships of investors that pool funds. The management firm that organizes the partnership, for example, a bank or insur- ance company, manages the funds for a fee.
Commingled funds are similar in form to open-end mutual funds. Instead of shares, though, the fund offers units, which are bought and sold at net asset value.
Commingled funds are similar in form to open-end mutual funds. Instead of shares, though, the fund offers units, which are bought and sold at net asset value.
What are real estate investment trusts?
A REIT is similar to a closed-end fund. REITs invest in real estate or loans secured by real estate. Besides issuing shares, they raise capital by borrowing from banks and issuing bonds or mortgages. Most of them are highly leveraged, with a typical debt ratio of 70%.
There are two principal kinds of REITs. Equity trusts invest in real estate directly, whereas mortgage trusts invest primarily in mortgage and construction loans.
There are two principal kinds of REITs. Equity trusts invest in real estate directly, whereas mortgage trusts invest primarily in mortgage and construction loans.
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