Private exchange funds funds

transferpricing

If a private exchange fund involves several investors holding the same stock,
How does this diversify a concentrated position for an individual?

bpdulog

it gives them all the ability to hedge or borrow money against in a bigger/more efficient way

lets say i only had 10 grand of a low basis stock, not much to do something with. but if i find 20 other people with 10 grand of the same one, our 200 grand can give us more flexibility to do a number of different hedging options/borrowings

dyga

SPOILER for the 2007 AM Exam Q2, the provided answer for diversifying a concentrated position was either Equity collar or a Private Exchange Fund and not Public Exchange Fund. Any idea why if you've taken that exam?

More generally, from a diversification perspective why is one preferred over the other (Private vs public) that is.

Thanks

Valores

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.

lcai

I think that is Public exchange fund Swanny.

bboo

So in a private exchange fund everyone is contributing the same holding?

aidebaobao

Yeah, I think. Just like economy of scale thing to hedge and monetize the position.

pennyless

mwvt9 could you please comment on why the 2007 AM guideline answer is specific about Private Exchange Fund vs. Public Exchange if you have seen/done that question?

I am still not clear on why one is better than the other from a diversification perspective.

Thanks



Edited 1 time(s). Last edit at Monday, May 18, 2009 at 08:44PM by passthismofo.

IAmNeil

i remember a really terrible question about collars vs. exchange fund vs. completeness fund etc...

the answer seems really underwhelming.

thommo77

passthismofo Wrote:
-------------------------------------------------------
> mwvt9 could you please comment on why the 2007 AM
> guideline answer is specific about Private
> Exchange Fund vs. Public Exchange if you have
> seen/done that question?
>
> I am still not clear on why one is better than the
> other from a diversification perspective.
>
> Thanks

I haven't taken this exam, so I can't comment.