Understanding Hedge Funds

What is a key difference between hedge funds and mutual funds?

• Hedge funds are open to all investors.

• Mutual funds use aggressive strategies.

• Hedge funds are mostly unregulated.

• Mutual funds can short stocks.

What is the primary goal of a hedge fund?

• To advertise to a wide audience.

• To minimize risk at all costs.

• To make money in any market condition.

• To outperform a benchmark index.

What does the term 'hedged position' refer to?

• Avoiding all forms of risk.

• Building a safety net by balancing long and short positions.

• Betting big in one market direction.

• Investing in only one type of asset.

How do hedge funds use statistical arbitrage?

• By investing in only tech stocks.

• By avoiding all forms of leverage.

• By using math and models to find asset pairs that move together.

• By predicting long-term market trends.

What is latency arbitrage?

• A strategy that relies on long-term investments.

• A method of predicting future market trends.

• A strategy that exploits delays in public market data.

• A way to avoid all forms of risk.

What type of investment do hedge funds make in distressed companies?

• They avoid investing in such companies.

• They purchase the company's debt.

• They invest in the company's competitors.

• They buy the company's stock.

What is the standard fee model for hedge funds?

• 5 and 50

• 2 and 20

• 1 and 10

• 10 and 100

Who are the typical investors in hedge funds?

• All types of investors

• Only government entities

• Accredited investors and qualified purchasers

• Retail investors

What role do quantitative developers play in hedge funds?

• They execute trades manually.

• They build systems for trading, data, and risk.

• They manage client relations.

• They handle legal compliance.

Why did CalPERS pull out of hedge funds in 2014?

• The fees were too high.

• They were required by law.

• They found better investment opportunities.

• They wanted to focus on tech stocks.