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P-Notes, ETF, Hedge Funds, Mutual funds, Alternative Investment Funds - Economics, UPSC Mains Exam Video Lecture
FAQs on P-Notes, ETF, Hedge Funds, Mutual funds, Alternative Investment Funds - Economics, UPSC Mains Exam Video Lecture
| 1. What are P-Notes and how do they work? |  |
Ans. P-Notes, short for Participatory Notes, are offshore derivative instruments issued by foreign institutional investors (FIIs) to overseas investors. They are used to make investments in the Indian stock market without the need for direct registration with the Securities and Exchange Board of India (SEBI). P-Notes provide anonymity to the investors as their identity is not disclosed. They work by the FIIs issuing these instruments to the overseas investors, who can then buy and sell Indian securities through the FIIs.
| 2. What is the difference between ETFs and Mutual Funds? | |
Ans. ETFs (Exchange-Traded Funds) and Mutual Funds are both investment vehicles, but there are key differences between them. While both pool money from multiple investors and invest in a diversified portfolio of securities, ETFs trade on stock exchanges like individual stocks, whereas Mutual Funds are bought and sold at the end of the trading day at the net asset value (NAV). Additionally, ETFs have lower expense ratios, higher liquidity, and can be bought and sold throughout the trading day, while Mutual Funds have higher expense ratios, lower liquidity, and can only be bought or sold at the end of the day.
| 3. How do Hedge Funds operate and what makes them different from other investment funds? | |
Ans. Hedge Funds are alternative investment vehicles that pool money from accredited investors and use various investment strategies to generate high returns. They operate by employing strategies like long/short equity, global macro, event-driven, and arbitrage to take advantage of market inefficiencies. What sets Hedge Funds apart from other investment funds is their ability to use leverage, short-selling, and derivatives to amplify returns and hedge against market downturns. They also have the flexibility to invest in a wide range of assets, including stocks, bonds, commodities, and derivatives.
| 4. What are Alternative Investment Funds (AIFs) and what role do they play in the investment landscape? | |
Ans. Alternative Investment Funds (AIFs) are privately pooled investment vehicles that collect funds from investors and invest in different asset classes such as private equity, real estate, hedge funds, venture capital, etc. They play a crucial role in the investment landscape by providing investors access to alternative investments that are typically not available through traditional investment avenues like stocks and bonds. AIFs offer diversification, potential for higher returns, and exposure to unique investment opportunities, making them attractive to investors looking to diversify their portfolios.
| 5. How do Mutual Funds and ETFs differ from Alternative Investment Funds (AIFs)? | |
Ans. Mutual Funds and ETFs are both regulated investment vehicles that pool money from multiple investors and invest in diversified portfolios of securities. The main difference between them and Alternative Investment Funds (AIFs) lies in the types of assets they invest in. Mutual Funds and ETFs primarily invest in traditional assets like stocks, bonds, and commodities, whereas AIFs invest in alternative assets like private equity, venture capital, real estate, and hedge funds. AIFs also have fewer regulatory restrictions and offer more flexibility in terms of investment strategies and asset classes.
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Dec 28, 2024 Last updated |
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