IFMP Mutual Fund Basic Certification (MFBC), Pakistan flashcards
IFMP Mutual Fund Basic Certification (MFBC), Pakistan · Build recall with a focused review session.
33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Mutual fund
- A pooled investment vehicle that collects money from many investors and invests it in a diversified portfolio managed professionally, with each investor owning units proportionate to their contribution.
- Net Asset Value (NAV)
- The per-unit value of a fund, calculated as total assets minus total liabilities divided by units outstanding; used for pricing creations and redemptions.
- Open-end fund
- A fund that continuously issues new units and redeems existing units at NAV on demand, so its unit count changes and it is not exchange-listed.
- Closed-end fund
- A fund with a fixed number of units issued once, then traded on an exchange at a market price that may differ from its underlying NAV.
- Front-end load
- A sales charge deducted when units are purchased, reducing the amount actually invested and therefore the effective return on the investor's money.
- Back-end load
- A redemption charge levied when units are sold, often structured as a contingent deferred sales charge that declines to zero over a specified holding period.
- Expense ratio
- Annual recurring fund costs, including management and administrative fees, expressed as a percentage of average net assets and deducted from fund returns.
- Asset management company
- The SECP-licensed firm that manages a collective investment scheme's portfolio and operations under the trust deed and offering document.
- Trustee
- An independent entity that holds fund assets in trust on behalf of unit holders and monitors compliance with the trust deed and regulatory requirements.
- Custodian
- A financial institution that safekeeps the fund's securities and cash, settling trades and holding assets separate from the AMC's own balance sheet.
- Offering document
- The legal document describing a fund's investment objective, policy, risks, fees, and operational terms; it must be provided to prospective investors before subscription.
- Trust deed
- The legal agreement constituting the fund as a trust, defining the roles of AMC, trustee, and unit holders and governing the scheme's operation.
- Diversification
- Spreading investments across securities, sectors, or asset classes so that any single holding's poor performance has limited impact on the overall portfolio.
- Systematic risk
- Market-wide risk affecting all securities, such as interest rate, inflation, or political shocks; it cannot be removed through diversification within an asset class.
- Unsystematic risk
- Company- or sector-specific risk that can be substantially reduced by holding a sufficiently broad and diversified portfolio of securities.
- Income distribution
- A payout to unit holders from dividends, interest, or profits earned by the fund, made in cash or reinvested in additional units.
- Capital gain distribution
- A payout of realized profits from selling securities at a price above their purchase cost; it is separate from the fund's ongoing income distributions.
- Reinvestment
- Using a distribution to buy additional units, typically at the ex-distribution NAV, thereby increasing the unit holder's holding and compounding future returns.
- Money market fund
- A fund investing in short-term, low-risk instruments such as treasury bills and bank deposits, aiming for capital preservation and liquidity with modest returns.
- Income fund
- A fund primarily investing in fixed-income securities like bonds and sukuk to generate regular income, with price sensitivity to interest rate changes.
- Equity fund
- A fund investing mainly in listed shares, offering higher long-term growth potential but with greater price volatility than money market or income funds.
- Balanced fund
- A fund holding a mix of equity and fixed-income securities, aiming to balance growth potential against income and capital stability.
- Index fund
- A fund that passively tracks a specified market index, holding securities in similar weights to replicate index performance at low cost.
- Benchmark
- A reference index or return measure against which a fund's performance is evaluated to judge whether the manager added value.
- Risk profile
- An assessment of an investor's willingness and capacity to bear losses, guiding the choice among money market, income, balanced, and equity funds.
- Liquidity
- The ease and speed with which units can be converted to cash at or near NAV; open-end funds generally offer redemption within the timeframe stated in the offering document.
- Cut-off time
- The daily deadline by which a subscription or redemption request must be received to be processed at that day's NAV rather than the next day's.
- Load-adjusted return
- The fund's gross return minus recurring expenses and any sales charges, showing what the investor actually keeps after all costs.
- Management fee
- A recurring fee paid to the AMC for managing the portfolio, usually a fixed percentage of net assets and included in the expense ratio.
- Total expense ratio
- The sum of all annual fund operating costs expressed as a percentage of average net assets, disclosing the true cost of holding the fund.
- Unit holder
- A person or entity owning units in a collective investment scheme, entitled to a proportionate share of the fund's assets and distributions.
- Redemption
- The process by which an investor sells units back to an open-end fund at the applicable NAV, receiving cash after any back-end load and processing time.
- SECP
- The Securities and Exchange Commission of Pakistan, the regulator that licenses asset management companies and approves collective investment schemes and their offering documents.