Alter TE9 Test

Q. Both event-driven and macro hedge fund strategies use:

• A. long–short positions.
• B. a top-down approach.
• C. long-term market cycles.

Q. United Capital is a hedge fund with $250 million of initial capital. United charges a 2% management fee based on assets under management at year end and a 20% incentive fee based on returns in excess of an 8% hurdle rate. In its first year, United appreciates 16%. Assume management fees are calculated using end-of-period valuation. The investor’s net return assuming the performance fee is calculated net of the management fee is closest to: (2020 Q26)

• A. 11.58%.
• B. 12.54%.
• C. 12.80%.

The return on a commodity index is likely to be different from returns on the underlying commodities because:

• A. data are subject to survivorship bias.
• B. indices are constructed using futures contracts.
• C. assets are not marked to market.

Q. Hedge funds are similar to private equity funds in that both:

• A. are typically structured as partnerships.
• B. assess management fees based on assets under management.
• C. do not earn an incentive fee until the initial investment is repaid.

None

• A. 7.8%.
• B. 7.4%.
• C. 5.8%.

Q. Which of the following is least likely to be considered an alternative investment?

• A. Real estate
• B. Commodities
• C. Long-only equity funds

Q. Relative to co-investing, direct investing due diligence is most likely:

• A. harder to control.
• B. more independent.
• C. equally thorough.

Q. The Sharpe ratio is a less-than-ideal performance measure for alternative investments because:

• A. it uses a semi-deviation measure of volatility.
• B. returns of alternative assets are not normally distributed.
• C. alternative assets exhibit low correlation with traditional asset classes.

Which of the following is most likely a private real estate investment vehicle?

• A. Real estate limited partnership
• B. Real estate investment trust
• C. Collateralized mortgage obligation

Q. The investment method that typically requires the greatest amount of or most thorough due diligence from an investor is:

• A. fund investing.
• B. co-investing.
• C. direct investing.