skycfa

That is Q2 from 2007 AM.

Windjam

Black Swan Wrote:
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> Wait, what? I thought an exchange fund wasn't 20
> people with the same holding, but 20 people with
> various concentrated holdings pooling their
> holdings into a more diversified fund.

You are absolutely correct!

jmh530

My understanding is that the difference between a private exchange fund and a public exchange fund isn't the type of investments but simply the manner in which they are organized.

strikethree

Black Swan Wrote:
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> My understanding is that the difference between a
> private exchange fund and a public exchange fund
> isn't the type of investments but simply the
> manner in which they are organized.


Yes, that was my understanding as well. I.e. Public can not change investments once contributed to exchange fund while Private you can subsitute investments, etc. but that answer from CFAI, just got me all confused -- we don't need that kind of confusion right now

susana

CFAI p. 199 seems to indicate only one stock holding unless I am reading it wrong.

mp3bu

Yeah, I just checked the book, mwvt9 was right. Should have known better than to hate on the champ. It says it can be a collection of different securities, but is typically the same security.

Zestt

ok, got that part, but when do you recommend private vs. public if you're only trying to diversify your concentrated position?

mik82

that's bcoz in private funds you have options to use hedging techniques i guess plus u can always adjust your holdings either increase or decrease and are not required to hold illiquid assets..

PalacioHill

I think the key between private and public exchange funds is that private exchange funds are usually structured so that the investor retains some exposure to the potential upside in the stock holding, unlike public exchange funds where you have probably diversified it away. Dont know much more than that because CFAI wasnt really explicit there and didnt find anything when I googled it after taking the 2007 exam

cityboy

sv102307 Wrote:
-------------------------------------------------------
> I think the key between private and public
> exchange funds is that private exchange funds are
> usually structured so that the investor retains
> some exposure to the potential upside in the stock
> holding, unlike public exchange funds where you
> have probably diversified it away. Dont know much
> more than that because CFAI wasnt really explicit
> there and didnt find anything when I googled it
> after taking the 2007 exam

sv and bdeora, thanks -- your answers make a lot of sense. This was confusing the heck out of me and given it was asked in 2007, not knowing was killing me.