Explanation:
Investors must try to speak to people of mixed seniority to assess the performances of the fund. The goal must be to find out what is actually going on in the fund rather than to have a sales pitch by the investor relations staff. If the investors are unable to get access to the actual decision-makers, it’s highly likely that their assessment of the performances of the fund will be incomplete.
Things to Remember
Due diligence is a critical step in the investment process. It involves a comprehensive appraisal of a business or a fund by a prospective buyer or investor to establish its assets and liabilities and evaluate its commercial potential.
Investors should interact with employees of mixed seniority within the firm before making an investment decision. This can provide a more comprehensive understanding of the fund's performance and potential risks.
Past performance is not always indicative of future results. Therefore, investors should not rely solely on past performance to make an investment decision.
Investors should conduct their own independent research and analysis before investing in a fund. This can help them make an informed investment decision and mitigate potential investment risks.
Ultimate access to all questions.
Q.2596 Gong Fang attends an investor meeting conducted by a large investment management firm. In the meeting, the firm launches a new fund and follows it up with an excellent presentation on the past performances of the funds previously launched. After the presentation, the firm’s CEO starts taking questions from prospective investors. In his case, Fang interacts with investor relations staff and gets his questions answered.
Fang feels satisfied with his interaction with the investor relation staff. This, combined with the CEO’s readiness to answer any kind of query about the fund, convinces Fang to invest in the fund.
Suppose Fang approaches you in retrospect, just before making good on his decision to invest in the fund. What advice would you give him?
A
That he should go ahead because his attendance of the investor meeting and interactions with the fund’s staff constitute due diligence.
B
That he must try to speak to the firm’s employees of mixed seniority before investing in the fund.
C
That he must try to dig into the past performances of the fund before investing in the fund.
D
That he should turn down the offer.
No comments yet.