Hedge Fund Knowledge Quiz

What is the primary objective of a hedge fund?

• To guarantee fixed income

• To achieve absolute returns using diverse strategies

• To replicate market index returns

• To provide tax-free income

Which of the following is NOT a typical hedge fund strategy?

• Arbitrage

• Distressed asset investing

• Momentum trading

• Guaranteed return investments

Which of these risks is MOST significant in hedge funds compared to mutual funds?

• Market risk only

• Leverage and liquidity risk

• Credit risk only

• No risk due to diversification

What is the typical fee structure for hedge funds known as?

• 1 and 10 rule

• 2 and 20 rule

• 5 and 50 rule

• Flat 5%

Which is the main reason why hedge funds in India have limited retail participation?

• Low return potential

• High minimum investment requirement and risk profile

• High transparency

• Government prohibition

Which of the following is TRUE about hedge funds in India?

• They can accept investments from retail investors freely

• They are allowed to use leverage and derivatives extensively

• They are required to maintain 100% in government securities

• They are regulated under RBI guidelines only

Why are hedge funds often criticized?

• Lack of regulation

• Low returns

• Guaranteed losses

• No use of leverage

What is the major source of income for hedge fund managers apart from management fees?

• Performance-based fee

• Brokerage commissions

• Spread on deposits

• Custody charges

Which risk-adjusted performance metric is MOST relevant for hedge fund evaluation?

• P/E Ratio

• Sharpe Ratio

• Dividend Yield

• Price to Book Ratio

In India, hedge funds are prohibited from investing in which of the following?

• Listed derivatives

• Unlisted securities

• Real estate directly

• Foreign securities under LRS