Types of Exchange Traded Funds (ETF)

Actively managed:These ETFs operate much more similarly to

typical mutual funds, where the fund manager buys and sells
stocks in the fund according to a set investment strategy.
Buyout Fund:
A buyout is the purchase of a company's shares in which
the acquiring party gains controlling interest of the targeted
firm.
Buyout strategies are often seen as a fast way for a
company to grow because it allows the acquiring firm to
align itself with other companies that have a competitive
advantage.
A buyout may occur because the purchaser believes it will
receive financial and strategic benefits, such as higher
revenues, easier entry into new markets, less competition or
improved operational efficiency.
Buyout process:
A complete buyout typically takes three to six months.
The purchaser examines the target companys balance sheet,
income statement and statement of cash flows, and conducts
a financial analysis on any subsidiaries or divisions seen as
valuable.
After completing its research, valuation and analysis of a
target company, the purchaser and target begin discussing a
buyout.
The purchaser then makes an offer of cash and debt to the
board of directors (BOD) of the target company.
The board either recommends the shareholders sell the buyer
their shares or discourages the shareholders from doing so.
Cont.
Although company managers and directors do not always
welcome buyout offers, the shareholders ultimately decide
whether to sell the business.
Therefore, buyouts may be friendly or hostile. Either way, the
buyer typically pays a premium for gaining controlling
interest in a company.
After completing the buyout process, the purchaser
implements its strategy for restructuring and improving the
company.
The purchaser may sell divisions of the business, merge the
business with another company for increased profitability, or
improve operations and take the business public or private.
Types of buyout
Management Buyout:
It occurs when the existing management team in the
company pool the resources together to take a
controlling interest in the company.
Leveraged Buyout:
It occurs when an entity is able to take controlling
interest of a company stock by financing a large
portion of these funds. The assets of the purchased
company are used as assets for collateral against the
loan to purchase the company.
Friendly take over:
It occurs when the bidder makes a formal offer to the
board of directors for the company. This offer will
contain explicit details of the purchase agreement,
which is then represented to shareholders approval.
Hostile takeover:
It occurs when the bidder attempts to bypass the board
completely in order to purchase the company. This can
be triggered by the board rejecting the initial offer
from the bidder or the bidder just goes directly to the
shareholders as they believe the purchase will benefit
the investors more than the management team.
Hedge funds:
Hedge funds are privately-owned companies that pool
investors' dollars and reinvest them into all kinds of
complicated financial instruments.
Legally, hedge funds are most often set up as private
investment limited partnerships that are open to a limited
number of accredited investors and require a large initial
minimum investment. Investments in hedge funds are
illiquid as they often require investors keep their money in
the fund for at least one year, a time known as the lock-up
period. Withdrawals may also only happen at certain
intervals such as quarterly or bi-annually.
Characteristics of Hedge
fund
They often employ leverage :
They will often use borrowed money to
amplify their returns.
Free structure: instead of charging an
expense ration only, hedge funds charge
both an expense ratio and a performance
fee. This fee structure is known as Two
and Twenty - 2% asset management fee
and then a 20% cut of any gains
generated.
 They offer wider investment latitude
than other funds:
A hedge funds universe is only
limited by its mandate. It can
basically invest in anything- land,
real estate ,stock, derivatives, and
currencies.
They are open to accredited or
qualified investors:
Hedge fund are only allowed to take
money from qualified investors
 Hedging Strategies
A wide range of hedging strategies are available to hedge funds. For
example:
selling short - selling shares without owning them, hoping to buy them
back at a future date at a lower price in the expectation that their price
will drop.
using arbitrage - seeking to exploit pricing inefficiencies between related
securities - for example, can be long convertible bonds and short the
underlying issuers equity.
trading options or derivatives - contracts whose values are based on the
performance of any underlying financial asset, index or other investment.
investing in anticipation of a specific event - merger transaction, hostile
takeover, spin-off, exiting of bankruptcy proceedings, etc.
investing in deeply discounted securities - of companies about to enter or
exit financial distress or bankruptcy, often below liquidation value.
Many of the strategies used by hedge funds benefit from being non-
correlated to the direction of equity markets
Risk of Hedge fund:
Concentrated investment strategy
exposes hedge funds to potentially
huge losses.
It typically require investors to lock
up money for a period of years.
Use of leverage, or borrowed money,
can turn what would have been a
minor loss a significant loss.
Thank you