Fund Structures

A negotiable security representing shares of a foreign company held by a U.S. depositary bank. ADRs trade in the U.S. (on exchanges or over the counter) in U.S. dollars, making foreign stocks accessible to American investors without needing international brokerage accounts. Despite trading in dollars, ADRs retain currency risk because dividends are declared in the foreign currency before conversion to USD.

Example: An investor purchases 100 ADRs of a Japanese automaker trading on the NYSE at $45 per share (denomin...

An investment company that typically sells a fixed number of shares through an IPO, which then trade on exchanges at market prices that can differ from NAV. Does not continuously offer shares or redeem them on demand (although it can issue more later, for example through a rights offering), and may use leverage to enhance returns.

Example: A closed-end municipal bond fund has a NAV of $10.00 per share but trades on the NYSE at $9.50, repr...

A pooled investment security that trades on an exchange like a stock throughout the trading day. ETFs typically track an index, sector, commodity, or other assets, combining the diversification of mutual funds with the intraday tradability of stocks. They use a creation/redemption mechanism with authorized participants to maintain prices close to net asset value (NAV).

Example: An investor purchases 100 shares of an S&P 500 ETF (like SPY) at 10:30 AM for $450 per share through...

An open-end investment company that pools money from many investors to purchase a portfolio of securities (diversified or non-diversified), with shares continuously issued and redeemed at prices based on NAV. Regulated under the Investment Company Act of 1940 with forward pricing: orders are filled at the next NAV computed after receipt, at a time the fund board sets (most funds compute it once daily at market close).

Example: A growth mutual fund with $500 million in assets and 10 million shares outstanding has a NAV of $50 ...

The per-share value of a fund calculated by dividing total assets minus liabilities by shares outstanding. Mutual funds calculate NAV at least once each business day at a time set by the fund's board (typically 4:00 PM ET, market close) and transact at forward pricing. Public offering price (POP) equals NAV plus sales load for load funds.

Example: A mutual fund with $500M in assets, $10M in liabilities, and 25M shares outstanding has a NAV of $19...

The Public Offering Price (POP) is the price at which a mutual fund sells its shares to investors. For shares sold with a front-end sales charge, POP equals Net Asset Value (NAV) plus the sales charge, and the formula is POP = NAV / (1 - sales charge percentage). For a no-load fund, or a share class with no front-end charge (such as Class C shares), POP equals NAV.

Example: A Class A mutual fund has a NAV of $19.00 per share and a 5% sales charge. POP = $19.00 / (1 - 0.05)...

Mutual fund share classes (typically A, B, and C) carry different sales-charge structures and ongoing expenses while representing ownership in the same underlying portfolio. The same fund is sold under multiple classes so investors can match the cost structure to their holding period and investment size.

Example: A client invests $80,000 in the XYZ Growth Fund. Class A charges a 5.0% front-end load (reduced to 4...

An investment company that purchases a fixed portfolio of securities and holds them unchanged until termination. Registered under the Investment Company Act of 1940 with a defined termination date, redeemable units (not shares), no active management after creation, and no board of directors.

Example: A UIT purchases a fixed portfolio of 30 dividend-paying stocks worth $50 million with a 5-year termi...