Open-ended mutual funds are investment vehicles that allow investors to buy and sell shares at the current net asset value (NAV), which is determined daily.
These funds are highly liquid and can be easily valued, making them a sound investment option for pension funds.
Why Are They Suitable for Pension Funds?
Pension funds require investments that are easily valued, transparent, and provide liquidity to meet benefit obligations. Open-ended mutual funds meet all these criteria.
Why Other Options Are Incorrect:
B. Reverse repurchase agreements:While they can be part of investment strategies, they are not easily valued compared to open-ended mutual funds.
C. Derivative instruments:Derivatives can be complex and difficult to value, making them less suitable for pension funds that prioritize transparency and simplicity.
D. Internal investment pools:These are investment vehicles used by governments, but their valuation may not be as straightforward or frequent as mutual funds.
References and Documents:
GAO Guide to Investment Management for Pension Funds:Recommends transparent, easily valued investments like mutual funds.
AICPA Pension Plan Audit Guidelines:Emphasizes liquidity and valuation in pension fund investments.
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