Pooled Investments: Synthesis
This synthesis ties together all the pooled investment types to help you quickly identify characteristics and compare vehicles on the exam.
Quick Identification Guide
| If the question mentions... | You're dealing with... |
|---|---|
| Continuous offering, redeemable at net asset value (NAV), 7-day redemption | Open-end fund (mutual fund) |
| Fixed shares, trades on exchange, premium/discount to NAV | Closed-end fund |
| Fixed portfolio, no management, trustees, termination date | Unit Investment Trust (UIT) |
| Intraday trading, index tracking, in-kind creation/redemption | ETF |
| 75/75/90, real estate, pass-through income | REIT |
| Investment Company Act (ICA) 3(c)(1), 3(c)(7), qualified purchasers, limited partnership | Private fund |
| 2 and 20, lock-up, leverage, long/short | Hedge fund |
| Closed-end fund, periodic repurchase, 5-25% of shares | Interval fund |
Key Numbers to Know
| Number | What It Means |
|---|---|
| 7 days | Maximum for mutual fund redemption |
| 75%/75%/90% | REIT rules (assets/income/distribution) |
| 95% | REIT gross income from passive sources |
| 100 | Maximum investors for 3(c)(1) exemption |
| 2,000 | Maximum investors for 3(c)(7) exemption |
| $1 million | Accredited investor net worth threshold |
| $200K/$300K | Accredited investor income (individual/joint) |
| $5 million | Individual qualified purchaser (investments) |
| $25 million | Entity qualified purchaser (investments) |
| 100 | Minimum REIT shareholders |
| 5/50 rule | No more than 50% of REIT shares held by 5 or fewer individuals |
| 5-25% | Interval fund repurchase offer range |
Comparison: Investment Company Types
| Feature | Open-End | Closed-End | UIT | ETF |
|---|---|---|---|---|
| Shares outstanding | Variable (unlimited) | Fixed | Fixed | Variable |
| Pricing | NAV (end of day, forward pricing) | Market price (continuous) | NAV | Market price (intraday) |
| Trading | Redeem with fund | Exchange | Redeem with trust | Exchange |
| Premium/Discount | Always at NAV | Can trade at premium/discount | At NAV | Usually near NAV |
| Management | Active | Active | None (fixed) | Usually passive |
| Leverage | Not permitted | Permitted | N/A | N/A |
| Can short/margin | No | Yes | No | Yes |
Why is this important? If a question describes a fund trading at a discount to NAV, it must be closed-end. Open-end funds redeem at NAV, so they cannot trade below NAV. This distinction appears frequently on the exam when identifying fund types.
Comparison: Private Fund Types
| Feature | Hedge Fund | Private Equity | Venture Capital |
|---|---|---|---|
| Invests in | Public market securities | Established private/public companies | Early-stage startups |
| Strategies | Long/short, leverage, derivatives | Buyouts, growth equity | Funding growth |
| Fund life | Ongoing (with lock-ups) | 7-10+ years | 10+ years |
| Liquidity | Limited (lock-up) | Very illiquid | Very illiquid |
| Capital | Invested at once | Called over time | Called over time |
| ICA exemption | 3(c)(1) or 3(c)(7) | 3(c)(1) or 3(c)(7) | 3(c)(1) or 3(c)(7) |
Exam Question Framework
When you see a pooled investment question, ask:
- Is it registered or exempt? (Registered = mutual fund, closed-end, UIT, ETF; Exempt = hedge fund, private equity (PE), venture capital (VC))
- How are shares acquired? (From fund = open-end; On exchange = closed-end, ETF)
- Is it redeemable? (Yes = open-end, UIT; No = closed-end; Limited = interval fund)
- Is it managed? (Yes = open-end, closed-end, hedge fund; No = UIT, most ETFs)
- Who can invest? (Anyone = registered funds; Accredited/Qualified = private funds)
Think of it this way: The exam tests whether you can match the pooled investment type to its defining characteristics. Focus on what makes each type unique: UITs have no management, ETFs trade intraday, REITs follow 75/75/90, hedge funds use 2 and 20, interval funds offer periodic repurchases.