Alternative Investments - Alternative Investments Section 1

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12. Which of the following is least likely to be a hedge fund strategy?

  • Option : B
  • Explanation : Macro, and not micro, is a hedge fund strategy.
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13. A type of private equity fund that invests in established profitable and cash-generative companies with solid customer bases, proven products, and high-quality management is most likely described as a (an):

  • Option : A
  • Explanation : A type of private equity fund that invests in established profitable and cash generative companies with solid customer bases, proven products, and high quality management is most likely described as a leveraged buyout.
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14. An investor may prefer a fund of funds to a single hedge fund if she:

  • Option : A
  • Explanation : Funds of funds presumably have some expertise in conducting due diligence on hedge funds and may be able to negotiate more favorable redemption terms than could an individual investor in a single hedge fund.
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15. Analyst 1: The management fee for a private equity fund is based on assets under management.
Analyst 2: The management fee for a private equity fund is based on committed capital.
Which analyst’s statement is most likely correct?

  • Option : B
  • Explanation : The management fee for private equity funds is based on committed capital whereas for hedge funds the management fees are based on assets under management.
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