cityboy

sv102307 Wrote:
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> 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.

cityboy

Exchange funds are organized in such a way that it exchanges funds between investors. So if there are 10 investors each have concentrated stocks, there will be fund created with all of them and have distributed amongst them. For Private Exchange, if a mutual fund is having stock where one investor's portfolio is concentrated, mutual fund will exchange that stock for the investor by mutual fund(same) and will make it more diversify. However this strategy will be possible when the stock is part of the mutual fund. While exchange fund is possible for any investor as they are creating their own fund.