Exercise 1. Define the statements True or False (paragraph 1).
1) Commodity index funds secure investors from exposure to commodity prices and not to the share prices of the businesses associated with them.
2) Pure commodity exposure of this kind at a low cost is a useful way to diversify an investment portfolio given that commodity returns do not move in synch with equities and bonds.
3) Commodity funds were popular with the investors trying to gain fast returns.
4) The split-capital investment company is a type of open-end investment company that has more than one class of share capital.
5) Usually, one type of share is for income and receives all the incomes generated by the trust, and the other is for capital gain.
6) The trust has an unlimited lifespan, compared with the life of other investment companies.
7) At the end of its life, its remaining assets are distributed among shareholders.
Exercise 2. Find words and expressions in paragraph 2 that mean:
1) returns
2) set up
3) to motivate
4) development
5) typical
6) quoting
Exercise 3. Read paragraph 3 and put correct verbs into the following sentences:
1) Hedge funds are a form of _____ investment mainly for institutional investors.
2) No one agrees on the exact definition of a hedge fund but, in broad terms, it is a specialist type of pooled investment that is free _____ in all financial instruments or markets, including high risk instruments.
3) It is a global operator and may employ a range of investment strategies, involving gearing (borrowings) and taking short positions (selling securities it does not own in order to profit from a falling market), as well as _____ long positions.
4) Structurally, the hedge fund is often _____ partnerships and has unregulated status, but its investments may not be promoted to the general public.
5) Many hedge funds are registered in the Cayman Islands where there is a lighter regulation, but some prefer registration in Dublin for the European exposure that this ____ .
Exercise 4. Read paragraph 4 again and put correct prepositions into the following sentences:
1) The hedge fund managers are often ex-investment bankers or other specialist financiers who give up highly lucrative jobs to set up a fund, and who know enough ___ markets to exploit a sophisticated tool book of modern investment vehicles.
2) They also invest their own money alongside that ___ investors, and will reveal how much.
3) They are attracting the capital of sophisticated investors, including, increasingly, pension managers who use hedge funds to diversify their funds ___ a way uncorrelated to their equity positions.
4) The strategies used by hedge funds vary enormously, but have ___ common that they aim at absolute returns.
5) Hedge funds may still hedge, which is to buy shares likely to rise, and take an offsetting short position ___ those likely to sell.
6) This was the theme of the first hedge fund, set up in the late 1940s ___ Alfred Winslow Jones, a former journalist.
7) Selling short, usually with a long position as well ___ hedging, is in itself a strategy. It has been the most profitable one since 2008.
Exercise 5. Find words or phrases from paragraph 4 to replace the words in italics in the sentences below:
1) The hedge fund managers are often former investment bankers or other specialist financiers who drop highly lucrative jobs to set up a fund, and who know enough about markets to use a sophisticated tool book of modern investment vehicles.
2) They also invest their own money alongside that of investors, and will disclose how much.
3) They are attracting the capital of sophisticated investors, including, increasingly, pension managers who use hedge funds to diversify their funds in a way unrelated to their equity positions.
4) The strategies used by hedge funds differ enormously, but have in common that they aim at absolute returns.
5) Hedge funds may still hedge, which is to buy shares likely to soar, and take an offsetting short position in those likely to sell.
6) This was the theme of the first hedge fund, launched in the late 1940s by Alfred Winslow Jones, a former journalist. Selling short, usually with a long position as well for hedging, is in itself a strategy.
7) It has been the most beneficial one since 2008.
Over to you
Prepare dialogues discussing the following:
What are the benefits and risks of hedging? What investment strategies seem to be the most relevant in the current economic situation?
UNIT XII