Funds Investing

B. Rights in a Unit: A Preliminary Analysis and Three Propositions

A modern trust deed invariably provides that the trustee will hold the unit trust assets for the unitholders ‘on and subject to the terms and conditions of the trust deed‘ and in the case of an authorized unit trust, the regulations made under section 81 of the Financial Services Act 1986.It is always possible for the trust deed or the relevant regulations to contain hundreds of covenants or terms that may alter or add to the rights in the beneficial interests of the trust assets. With the varieties of unit trusts and the varieties of units in the market today, the significance of the qualifying statement ‘on and subject to the terms and conditions of the trust deed‘ may easily be overlooked. Read the rest of this entry »

The swap terms available to the insurance company are as follows:

1. Every six months the life insurance company will pay LIBOR.
2. Every six months the life insurance company will receive 8.40%.

What has this interest-rate contract done for the bank and the life insurance company? Consider first the bank. For every six-month period for the life of the swap agreement, the interest-rate spread will be as follows: Read the rest of this entry »

For regulatory purposes, there are two essential scheme documents:

1. the instrument of incorporation (if a company) or the trust deed (if a trust‘;
2. the prospectus or offering document, also known in some jurisdictions as scheme particulars.

It is the instrument of incorporation that establishes the mutual fund, and a fund established as a company may well have a certificate of incorporation before it applies for authorisation. However, it cannot be offered to the public until it has an order of authorisation. Read the rest of this entry »