Sie Reit Flashcards
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
NAV
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´ ì¢ì¼ë©´, share price ê° ì¬ë¼ê°ëë° 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