Sie Reit Flashcards ionicons-v5-c

REIT

- Companies that own, manage, finance income producing real estate- Alternative to investing in bonds (consistent income)- Follow UIT tax rule; corporate level first, investor at IRS- Rental income/expense related to it is tax deductable- Tax exempt as long as they distribute 90% income but taxed on any income retained on BS- Investor taxed at ordinary rate on received dividends

usual process of reit

Obtain seed capital through initial investors - issue shares through IPO - obtain revolving line of credit of bank

Dividend reinvestment program (DRIP)

allow existing investors to purchase more share at discount, new investor pay full

valuing all of properties & equity a REIT has in its portfolio

If price > NAV

will create value as they acquire properties NAV = (value of property)/(outstanding share)

REIT Types

publicprivate

Public (registered with SEC)

- Listed/traded on securities exchange- LiquidityNon listed: no secondary market

Private (not required to be registered SEC)

- Not listed on securities exchange- Liquidity risk

REIT distribution process

Expense -> management fee -> dividends to investors

To be qualified as REIT,

need to pay out 90% income

Mortgage REIT

- Invest in mortgage-backed securities, commercial MBS, financing behind properties- 90% income distribution

Hybrid REIT

Both actual properties and mortgage debt

Hedge funds

Investment company act of 1940 applies to investor/issuer

hedge fund purpose

protect public interest in investing by eliminating conflicts of interest - doesn't need to be registered with SEC

Section 3c1

fund can't be owned by more than 100 beneficial shareholders

section 3c7

fund must be owned by qualified purchasers (high income, less than 500)

Privately placed fund require

private placement memorandum

Black check

fund with no stated object/investment yet

hedge fund Fall under regulation of

US commodity futures trading commission

Volcker rule

limit speculative investment made by bank, encompasses hedge fund

Lock up period:

can't withdraw until some point

hedge fund require

High minimum investment due to fewer investors than mutual fund

Private equity investment

- High initial min. investment requirements - Liquid - Long term

Fund manager

- Taxed as ROI not ordinary income tax rate- Partners taxed as income

Hedge fund taxed at

LT capital gain rate of 20% due to longer time

Exchange traded products

- Shares of mutual fund that trade on exchanges like stock- 50,000 share blocks typically- Advantage over mutual fund: can be traded any time- Investor receive dividend/interest - Provide diversification with lower expense ratio than mutual fundTax efficient vehicles with low transaction cost

ETF is a company that

- Issue shares in exchange for deposit of basket assets- Identifies as ETF in sales literature- Issue shares that are approved for listing on an exchange- Discloses its daily net asset value publically, and any premium/discount from actual securities- Index fund

ETF can consist of

- Large cap- Small cap- Growth- Value companies - Entire indices or sector of market (ex. Energy, industrial, tech. etc)

Inverse ETF

Ex) inverse ETF of S&P 500 at 5S&P increase by 5%, ETF decrease by 5%

ETF ì „ë§ì´ 좋으면, share price 가 올라가는데 Share price > NAV =

create arbitrage opportunity--> selling ETF short and buy until prices align

Exchange traded notes (ETNs)

- Notes of indebtedness traded on securities like stock/ETF- Unsecured, unsubordinated note issued by bank- Return amount that tracks an underlying index- Do not actually own asset, but receive value of index at time of maturity - Can be traded throughout day and liquidSubject to credit risk of bank issuing ETN