CSI IFC Exam With Confidence Using Practice Dumps

The investor in this scenario is concerned about fund expenses (MERs) and prefers a product with lower costs and potential for higher returns.

According to the CSC materials, exchange-traded funds (ETFs) are known for having:

Significantly lower management expense ratios (MERs) compared to mutual funds and most other managed products, because they are generally passively managed and do not bear the high costs of active portfolio management.

Lower trading costs due to the in-kind creation and redemption process, which reduces the need for the fund itself to buy and sell securities.

Opportunities for higher returns as lower costs directly enhance net returns to investors.

In contrast:

Segregated funds (B) are insurance products with higher fees due to guarantees.

Hedge funds (C) typically charge very high fees (often 2% management + 20% performance fees).

Liquid alternatives (D) also come with higher MERs and are designed for diversification and risk management, not necessarily for low cost.

Therefore, the most appropriate choice is Exchange-traded funds (ETFs), as they best meet the investor’s preference for low MERs and potential for higher returns.

A mutual fund trust structure allows the fund to avoid taxation by distributing its income to unitholders. The feedback from the document states:

"The most common structure for mutual funds in Canada is the open-end trust. The trust structure allows a fund itself to avoid taxation. Any interest, dividends and capital gains income, net of the fund’s fees, expenses and capital losses, if passed to its unitholders each calendar year, will allow the trust to avoid being taxed on its income."

An income trust is an investment trust that holds income-producing assets, such as debt instruments, royalty interests, or real properties. It can be structured as either a personal investment fund or a commercial trust with publicly traded closed-end fund shares. The main attraction of income trusts, in addition to certain tax preferences for some investors, is their stated goal of paying out consistent cash flows for investors, which is especially attractive when cash yields on bonds are low12

References = Canadian Investment Funds Course (CIFC) - Module 2: Investment Products - Section 2.3: Income Trusts3 and web search results from search_web(query="income trust")12

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