Which statement about mutual fund share redemptions in an open-end fund is correct?
Explanation
Open-end mutual funds must satisfy investor purchases and redemptions at NAV and must manage liquidity to meet redemptions, sometimes requiring asset sales or cash buffers.
Other questions
Which of the following best captures the primary benefit of constructing a diversified portfolio rather than holding a single security?
What is the main purpose of an Investment Policy Statement (IPS)?
Which two components define an investor's risk tolerance according to the chapter?
An investor has a 20-year horizon, ample liquid savings for emergencies, and high familiarity with equity markets. Which statement best describes the investor's ability and willingness to take risk?
Which of the following asset allocation choices is most consistent with an investor who has a short time horizon and a low risk tolerance?
Which element of the risk management framework is primarily responsible for translating board-level risk appetite into day-to-day investment and operational limits?
When defining asset classes for a strategic asset allocation, which characteristic is LEAST important?
Which of the following is the most important single determinant of long-term portfolio performance according to the chapter?
A pension fund with a defined benefit obligation that must pay retirees annually and has an aging membership is most likely to emphasize which of the following in its IPS?
Which of the following best describes a key difference between an ETF (exchange-traded fund) and a traditional open-end mutual fund?
Which statement about target-date (lifecycle) funds is most accurate?
Which reason explains why the true market portfolio in the CAPM is unobservable and often proxied?
Which of the following best describes a practical limitation of applying the CAPM to estimate expected returns?
Which performance measure adjusts for total portfolio risk and is denominated in percentage return units to facilitate comparisons with benchmark returns?
Which performance metric is most appropriate when an investor holds a single, undiversified portfolio and cares about total portfolio risk?
When an investor or committee wants to compare multiple managers but also see the magnitude of their over- or underperformance in percentage return terms at market risk, which measure should they use?
Which pooled product is least likely to be available to most retail investors because of regulatory and minimum investment restrictions?
What is the primary reason endowments often allocate a significant portion of assets to alternative investments?
Which of the following best describes what a separately managed account (SMA) offers compared with a pooled mutual fund?
Which statement about ETF market prices relative to their NAV is most accurate?
Why might an institutional investor select a benchmark index that reflects ESG exclusions for performance measurement?
Which statement best describes the primary difference between active and passive management in the industry context provided?
In the context of the chapter, what is a main reason institutional investors might adopt external asset managers for specialized strategies?
Which statement about smart beta strategies is consistent with the chapter's discussion?
Which of the following is a typical feature of private equity funds as described in the chapter?
Which factor most directly causes the diversification ratio to improve (i.e., decline) when forming a multi-asset portfolio?
What is a common reason endowments maintain a smoothing rule in their spending policy?
Which of these is an advantage of using an index fund (passive) versus an actively managed fund, as discussed in the chapter?
Which investor type is most likely to face regulatory limits on the share of domestic equities or foreign exposure they may hold?
Which is a primary reason why hedge funds historically charge performance fees in addition to management fees?
What is the main enterprise-level benefit of integrating risk management into the strategic decision-making process?
Which of the following changes in capital markets would most likely cause the efficient frontier to shift upward, all else equal?
Which of the following is a limitation of diversification emphasized in the chapter?
Which of these best explains why an investor might select a benchmark for an IPS?
A multi-boutique asset manager structure is characterized by which of the following features?
Which of the following is an example of a legal or regulatory constraint that should be included in an IPS?
Why might a large asset manager introduce 'liquid alternatives' to its product lineup, according to the chapter?
Which of the following is a potential downside of using an index (proxy) for the market portfolio in CAPM applications?
When measuring portfolio diversification benefits, which metric described in the chapter compares portfolio standard deviation to the average asset standard deviation?
According to the chapter, which factor should predominantly determine manager selection for a given asset-class sleeve?
Which statement best characterizes a life insurance company's typical investment priorities compared with a property and casualty (P&C) insurer?
Which trend is identified as increasing access to investment advice for younger and mass-affluent investors?
Which of the following is a correct observation about the role of capital market expectations in strategic asset allocation?
Which is the most accurate statement about hedge fund fees as discussed in the chapter?
Which of the following best describes why a pension fund sponsor might prefer defined contribution plans over defined benefit plans, as noted in the chapter?
When an investor with a large concentrated position in their employer's stock wants to address the concentration, which of the following portfolio actions is most consistent with guidance in the chapter?
Which of the following is an example of a 'unique circumstance' that might be reflected as a constraint in an IPS?
Why might an asset manager include a rebalancing policy in the IPS appendices?
Which of the following best explains why ESG integration may require changes to expected return and risk estimates for an asset class?