Question

Briefly describe each of the following financial institutions, investment banks, commercial banks, financial services corporations, pension funds, mutual funds, exchange traded funds, hedge funds, and private equity companies.

Answer 1

Investment banks are specialized division of bank which deals with raising of funds and advisory services to the clients and also helps in selling the securities and underwriting of new issues for raising funds.

Commercial banks - these are the banks which involves the basic banking function of acceptance of deposits and sanction of loans and advances. Apart from core banking business, commercial banks provide an array of financial services to their clients.

Financial service corporation- refers to the financial corporations which involve into offering any kind of financial services to the client for example Factors, stock broking services, lease financing services, hire purchase services etc.

Pension funds- A pension fund is a fund or scheme which provide retirement income. pension funds plan for retirement and investment contribution of employer and employee into different investment vehicle.

Mutual fund- it is scheme which collect the funds from small investors, pool the fund and invest the funds into a variety of investment avenues to earn a fair rate of return.

Exchange traded funds are those funds which traded regularly on stock exchange, it is a kind of investment fund

hedge funds- it is a fund that involves in investing and trading a wide range of investment with the objective of maximization of performance return and minimizing investment risk.

Private equity companies- these are called private limited companies in which ownership lies between few members and number of members are limited