Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation including, but not limited to, Manufacturers & Traders Trust Company (M&T Bank), Wilmington Trust Company (WTC) operating in Delaware only, Wilmington Trust, N.A. (WTNA), Wilmington Trust Investment Advisors, Inc. (WTIA), Wilmington Funds Management Corporation (WFMC), Wilmington Trust Asset Management, LLC (WTAM), and Wilmington Trust Investment Management, LLC (WTIM). Such services include trustee, custodial, agency, investment management, and other services. International corporate and institutional services are offered through M&T Bank Corporation’s international subsidiaries. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank. Member, FDIC.

M&T Bank Corporation’s European subsidiaries (Wilmington Trust (UK) Limited, Wilmington Trust (London) Limited, Wilmington Trust SP Services (London) Limited, Wilmington Trust SP Services (Dublin) Limited, Wilmington Trust SP Services (Frankfurt) GmbH and Wilmington Trust SAS) provide international corporate and institutional services.

WTIA, WFMC, WTAM, and WTIM are investment advisors registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply any level of skill or training. Additional Information about WTIA, WFMC, WTAM, and WTIM is also available on the SEC's website at adviserinfo.sec.gov.

Private Banking is the marketing name for an offering of M&T Bank deposit and loan products and services.

M&T Bank

Equal Housing Lender. Bank NMLS #381076. Member FDIC.

Investment and Insurance Products • Are NOT Deposits • Are NOT FDIC Insured • Are NOT Insured By Any Federal Government Agency • Have NO Bank Guarantee • May Go Down In Value

Investing involves risks and you may incur a profit or a loss. Past performance cannot guarantee future results. This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any security or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. There is no assurance that any investment, financial or estate planning strategy will be successful.

Wilmington Trust

Ways to Invest Your Assets

Now that you’ve been introduced to the different asset classes, it’s important to become familiar with specific managed investment vehicles. These are products that offer investors access to professional investment management across the different asset classes. Typical managed investment vehicles include:

Mutual Funds

An investment company that directly pools money from multiple investors to purchase publicly traded securities, such as stocks and bonds.

Exchange-traded Funds (ETFs)

A type of investment company whose shares are traded on stock exchanges. They are typically designed to track an index or a particular market segment.

Separately Managed Accounts

Arrangements that engage a professional investment manager to manage a portfolio of individual securities to a particular objective within your account.

Private Funds

A type of investment company exempt from registration and restricted to qualified investors. Typically pursue variations from long-only investment strategies, such as hedge strategies, and can invest significantly in derivatives, non-public securities, non-security assets such as real estate and natural resources, or a combination of these.

Mutual funds

This vehicle pools money from multiple investors to purchase securities such as stocks, bonds, and/or money market instruments. As an investor in a mutual fund, you have what’s called a “pro rata interest” in the pool of securities, as opposed to directly owning individual securities or stocks. Each fund is a portfolio of a number of securities built around a specific asset class or investment objective—such as "U.S. stocks" or "long-term growth."

Pros

Presents a convenient opportunity to invest in a diversified portfolio of securities
Professionally managed to stated investment objectives
Can purchase or sell daily, typically with one business day settlement, at the fund’s net asset value (NAV), calculated at the end of each day

Cons

Professional managers charge an advisory fee, and funds incur various administrative expenses
Depending on the fund, you may incur sales and/or redemption charges
Individual investor has no control over the fund’s portfolio
Capital gains taxes can be incurred, even if you haven’t sold shares

Exchange-traded funds (ETFs)

ETFs are traded on stock exchanges and typically track an index. They invest in securities intended to track the returns of stocks, commodities, bonds, or other assets, such as foreign currencies. The popular S&P 500 Index, for example, is the underlying (“reference”) index for a number of ETFs.

Pros

Tax efficient
Daily trade liquidity (two- or three-day settlement)
Typically have lower fees than most mutual funds in the same asset class
Quick way to access a diversified portfolio of securities

Cons

Shareholders don’t directly own the underlying investments
Pursuing index returns means no intent to seek excess return—an ETF meeting its objective would return the benchmark rate minus fees and expenses

Separately Managed Accounts (SMAs)

Like pooled investment vehicles, such as mutual funds and ETFs, SMAs are portfolios managed by a professional investment manager. Unlike pooled investment vehicles, the investor maintains the account and directly owns the portfolio securities.

Pros

Shareholders directly own the underlying investments
May offer an opportunity for custom tax treatment, as investors have their own individual cost basis
Investors can contribute existing holdings into the portfolio instead of only investing cash
Customized, professional portfolio management, including restrictions on security types (industries or sectors) as well as individual securities

Cons

Minimum investment amounts, commonly $100,000 and higher, may require a material commitment to access a given asset class or strategy
Diligent research is key, as individual managers are not required to file prospectuses, yet understanding strategies and implementation is important to matching managers to your particular objectives

Private Funds

This vehicle basically describes any non-publicly traded business structure that pools together the capital of many investors in a manner comparable to a mutual fund. The most common structures are limited partnerships and limited liability companies. The daily management for these is the responsibility of the general partner or managing member, and investors take the role of limited partners or members, respectively.

Pros

May offer advantageous tax treatment, particularly compared to mutual funds
The less-liquid structure and absence of regulatory investment restrictions applicable to mutual funds allows the investment manager to employ leverage, use derivatives, and invest in illiquid assets, which may offer additional diversification and opportunities for excess return
Allow for investments in strategies reserved for sophisticated investors
Provide access to talented managers drawn to the freedom to transact in a variety of markets

Cons

Liquidity may not be offered, or may be limited, including notification periods, lockups, and gates
Potential exposure to investment risks in addition to broad exposure to securities markets, such as sector concentration, derivatives, and/or leverage
Low or no transparency of portfolio holdings
Due diligence in the segment is particularly complex given the range of strategies and potential terms, as well as the private nature of the offerings
Investors receive a K-1 for a tax document, which is more complicated, and some partnerships do not have their tax documents available before the April 15th deadline, requiring an extension

Next: The Investing Process
previous: Asset Classes