The Dynamics of Funds - Assignment Example

Section The dynamics of funds with respect to the changes in time has been linked to the advancements or the trends registered in the contemporary world. The preference of each model against another has been pegged on the associated risks and the profitability that may be developed from the option of preference. The distinction of one model of funds to another can be presented via the evaluation of the procedures or methodologies that are deployed through the realization of the eventual aims. Other contributory factors that assist in the evaluation of the advancements made by a model of preference can be sourced from the governing principles in terms of contribution and subscription. Funds can be described as the vehicles upon which investor pool their monetary resources to initiate a joint investment (Bodie 56). The beauty of this approach is normally aligned to the fact that possible losses are shared across the group, with little impact on individual investors. On the other hand, the profits registered are also shared in a similar manner; thus proposing this model for consideration in a significant number of investment approaches. A focus on the dynamics exhibited on the common funds based investment channels leads to the development of a perception that has been registered in this field. A reflection on mutual funds indicates a rather reluctant nature in the preference accorded to this model of investment by potential investors. May be an evaluation of the aspects that involves in the realization of a mutual fund investment can lead to the development of a deeper insight on this dynamic. Mutual funds focus on pooling together risks in terms of investment. Small investors pool their monetary value under one basket, thus aligning themselves for a strengthened investment. The caption point that is routinely developed via this approach is the fact that the investment is modeled along with an intelligent platform (Kent 97). The flow of monetary investments under mutual funds has posted significant adjustments across the twenty year period. A reflection on the annular performance of a mutual fund based investor, such as Cohen & Steers Realty Shares (CSRSX), reflects the indicated trend. This organization has been posting mixed adjustments in its annular revenue overview. The implication that may be coined to these mixed results may be fetched from the listed examples. Others include the dynamics experienced in small scale investments across the lapse of time. The contemporary world has provided numerous, and safe investment options for the small investors, thus pointing on the reasons behind the decline. Apparently, it can be proposed that the small investors are slowly running away from this model of investment and instead peg their focus on other models of investments that they exercise direct authority against. In respect to the latter assertion of authority, small investors have exhibited an increased desire to express direct authority on the proceedings of their investments. Their preference for a third party is only pegged on the advice perception. This implies that the implementation of this model of investment is facing increased challenges from the demands placed by the potential investors. This hypothesis can be utilized to illustrate the decline in preference of this model of investment in accordance to the statistics registered in the last two decades. An evaluation of the statistics fetched from this field along the twenty (20) years period indicates slight decrease in the number of stocks acquired via this model (Source of data: http://www.icifactbook.org/ and bigcharts.com). A reflection of yet another brilliant model of funds may point on the pension fund. These funds are, mainly, placed by the employers as an effort to secure the future of their employees upon termination of the working period or retirement. Various advancements have been registered against the preference of this model of funds. This is mainly oriented along the developments in economic ambitions. World economies have progressed to promote the increase in self employment avenues, visualization of this model as the only viable option for economic growth. On this regard, little individuals have pegged their future on pension funds. Subsequently, the lengthened period upon which pension funds presume prior to their maturity has been considered as a restraining factor to their preference. This implies that few individuals have proceeded to down to prefer their commitment to this model of funds. An analysis of the performance of this model of investment can assist in exemplifying this assertion. There has been a non-constant decline in the assert accredited to this model across the world (Russ 67). However, a study in the trends exhibited by this vehicle of investment has been indicating mixed results in terms of performance. There seems to be reduced instances of increase along the twenty (20) years period. These increases can be associated to the efforts embraced by the respective authorities towards harnessing the preference of this model of investment. In a significant number of instances, the investment via the pension funds scheme is normally associated to civil servants via the incorporation of government base avenues. The increased preference of accessing employment from the government based corporate can be described as the means upon which the pension funds grows wings for its escalation. (Source of data: treasury inspector general for tax administration and http://www.oecd.org). Subsequently, there have been increased moments where the subscription to a pension program has been initiated via the provision of government based initiatives that are oriented along policies, directives and legislatives. In such opportune moments, the growth of this model of investment has registered increased growth. These moments have proceeded to illustrate the dynamics of increase in preference that have been expressed sparingly in the statistical records of this model of investment (Russ 76). A focus on hedge funds leads to the evaluation of a luctive and active model of investment. An overview of this model of investment can anneal its description to mutual funds. The difference in this instance is the reduced restriction and the subsequent amount associated to this model. Hedge funds seek to offer opportunities for immense investments in terms of capital. This field of investment can be described as a field for the big investors, in that the capital invested does not meet the qualities of being clustered as a small scale investment. The key interest in such an investment is the desire to reduce the impact of possible losses. On the other hand, the returns that are attributed to this model as also improved due to the professional contribution that is associated to the model. This information may be used to develop detail assertions on the data of the performance of this industry in the last twenty (20) years. Initially, the Hedge funds industry has been posting mixed results across this period. There have been decline in the asserts, which are paired by immediate raise in the forth coming years. For example, some of Hedge funds strong players, such as Global Macro, have registered mixed results ever since 1994. There have been significant drops in profitability, a development that has been linked to the increased assert liquidation. In the case of Global Macro, the statistics presented during the year 1999, 2000, 2004, 2008 and 2009 have indicated significant drops in net asserts. However, the events that lapses after such a period indicates increase in the assert accumulation. This trend may be explained by the incorporation of managerial concepts, as well as the events at the global stage. A manager in charge with the dispensation of the investments under Hedge funds may opt to initiate constrains, such as GATEs, in effort to ensure that the increased liquidation is restricted. On the other hand, the declines in assert volumes may be associated to major events trending on the global arena; such as change in government regimes, financial meltdown and terrorism attacks, amongst others. (source of statistical data: Hedge Fund Research, Inc) Upon the quantification of the involved restriction, the increased preference of ETFs (Exchange -Traded funds) model of investment can be discerned. This can be linked to the increased flexibility of this model and the reduced risks associated alongside. The isolation of an opportune model for investment can be described via the interrogation of the options that are interrogated by a channel. ETFs are considered as a flexible model of investment with respect to the descriptive nature of their features (Russ 67). In some markets, such as Hong Kong, where the performance of ETFs has been awarded an increased priority in terms of preference, there have been increase in the trends stocks levels exchanged via this model. However, this does not imply a set of positive results along the 20 year period. The flow of revenues associated to this industry has been challenged by various scares, chief amongst them the economic crunch of 2008/09. However, the performance of the industry has always maintained the positive curve. An evaluation of a EFT company, such as Tucker Fund of Hong Kong, indicates the margins of the described performance. This organization has continuously posted an increase in its listings, especially the light periods. This period s determined by the activities featured at the global arena. The subscription curve to this vehicle of investment has indicated a continous growth rate across the twenty (20) years period (Rawlings 76) (source of data, http://www.hkex.com.hk/eng/etfrc/ETFStat). Section2 The duration of expedition is the key determinant of the model of investment to be ordained under treasury based options. A wise financial bases his or her desire to invest on the amount of returns that are anticipated to be reaped from the model of preference. Various factors are utilized in the quantification of the appropriate channel to embrace during the determination of the preference option of choice. The limiting factor that attributed to this model of preference in terms of investment. The decisions of orienting the monetary power to either of the two options accommodated by treasury based investments can be listed as a factor that is primarily determined by the SLOPE of the two most common models. An evaluation of the T-bill and T-bill in terms of interest can assist in the quantification of the profitability that is anticipated by either of the options. A preference of the T-bill against the T-bonds will be developed upon the evaluation of the profitability in between the two options in terms of interest. However, the interest rates of T-bonds will have to be broken down into convenient options in order to ensure that the distinction of accuracy in terms of time is achieved. This implies that the realization of an ideal option upon which to base the eventual monetary investment will have to be pegged on the anticipated monetary contribution (Russ 64). In addition, the contribution of other annexed but essential factors will formulate essential grounds upon which to base the investment decision. This will be based on the aspects such as the as the period of maturity. Investments that can be described as BULLETs based implies that the anticipated investment will only be based the model of investment preferred by the investor. BULLETs simply imply that the investment is either fully short term based or wholly long term based. Investment on this model of approach may be verified by the involvement of the comprehensive evaluation of the desires that are attributed to the investment funds. For example, T-bonds are normally associated with a lengthened maturity period. This implies that their preference as the model of choice under BULLET based investment will be evaluated by the desire of the funds. For example, managers associated with pension funds may opt to place their funds on this channel of investment (Nguema 78). On the other hand, investments coined on the T-bills can be described as the short term based investments where the investors seek to redeem profitable supplement to their investments, or simply as returns. The beauty of investing in treasury based investments is the ascertained returns that are associated to the units. This is further amplified by the evaluation of the risks involved. On that note, it is wise to evaluate other factors that are attributed to this model of investment. The limiting aspect of treasury based investments is the maturity time. These options are hinged to a fixed timeline in terms of maturity. The implication of this concern is that the liquidation of the attained ratios cannot be accomplished upon the convenience of the investor. This assertion implicates that an investor that is willing to reap increased benefits from treasury based investments can only achieve this ambition via incorporating both short term and long term maturity investments. In a detailed array, a manager needs to evaluate the prospects of attaining the desired interest in a timely manner. This implies that the principles of the identification of the appropriate option for consideration and the ability to place investments in the opportune moment are central to the success of the investor (Nguema 64). Managers investing in treasury based options needs to develop additive skills towards the maximization of the profitability. This can be achieved by combining the two models of investment that is T-bonds and T-bills. The balancing point can be defined as the point upon which the equilibrium between the time spent in the investment and the anticipated maturity period may be attained by incorporating skills such as LEVELs. This proposal is only declared active via the incorporation of both options in the investment plan. LEVELs assist in the development of balance across the investment period. Investors may be advised to presume initiatives of placing a lengthened period of investment, most probably on a T-bond model and then cushion it with periodical investments in the model of T-bills. This ensures that the investor reaps some returns along the way as the eventual main investment awaits its maturity period. The attainment of this proposal can be enforced further via the utilization of appropriate SLOPE techniques. This is incorporated by the involvement of excellent balancing skills in terms of the returns anticipated by the T-bonds, and a comparison of the effective investments that are desired to be initiated in terms of T-bills. This can be described as a respond in terms of ensuring a continuous flow of returns in a treasury based investment. Work Cited Bodie, Zvi, Alex Kane, and Alan J. Marcus. Investments. Boston, Mass: McGraw-Hill Irwin, 2005. Print. Kent Daniel, Mark Grinblatt, Russ Wermers, Sheridan Titman. “Measuring Mutual Fund Performance with Characteristic-Based Benchmarks,” Journal of Finance, 52:3, July 1997 Nguema, Jean F. "Comparative Statics and Optimal Portfolios." The Journal of Risk Finance. 7.4 (2006): 415-424. Print. Rawlings, Laura, Lynne D. Sherburne-Benz, and Julie VanDomelen. Evaluating Social Funds: A Cross-Country Analysis of Community Investments. Washington, D.C: World Bank, 2004. Print. Russ Wermers, “Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transactions Costs, and Expenses,” Journal of Finance 55:4, (2000), 1655-1703. Read More