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WorksheetsHedge Funds
Total questions: 13
Worksheet time: 21mins
Which of the following is not important for the expected trading costs of a trade:
Trade size
Asset class
Market conditions
The zodiac sign (Sternzeichen) of the trader
True or False: Large funds tend to make larger investments to invest a sizeable share of the assets under management.
True
False
True or False: Large trades are more likely to move prices and make trades less profitable.
True
False
True or False: In contrast to mutual funds, hedge funds are not allowed to use leverage.
True
False
What does AUM stand for in the context of hedge funds?
Assets under Management
Adobe Update Manager
Adaptive User Model
Animal Unit Month
What is a hedge fund?
It is a pool of investors' money with low risk investment
a private investment fund run by partners
It is the same as a pension fund
What kind of investors invest in hedge funds?
only banks
only very wealthy private investors
banks, insurance companies, high-net worth individuals
choose the correct statement
mutual funds as well as hedge funds can only invest in stocks and bonds
mutual funds contrary to hedge funds cannot invest in securities that are not registered with the Securities Exchange Commission
mutual funds and hedge funds can invest in currencies, derivatives, land and real estate.
leverage is a way to
invest by using credit lines and hope the returns on investment are bigger than the interest.
invest by selecting safe securities such as bonds and shares
be less exposed to investment risk
a long/ short equity strategy is when
buys underprices stocks while selling overpriced shares
buys overprices shares while selling underpriced stocks
What does "hedging" or "hedged" mean?
Protection against risk
It's a type of car insurance
It's a type of currency
Name two reasons why hedge funds use a long-short strategy (one choice)
(1) for protection against rising prices; (2) to make money
(1) for protection against falling prices; (2) to lose money
(1) for protection against falling prices; (2) to make money
13-22.
Answer the questions below after watching the video
What is the typical structure of a hedge fund?
Sole Proprietorship
Joint Venture
Limited Partnership
Corporation
Who is the general partner in Pete Capital Fund 1?
A government entity
A financial advisor
An external investor
Pete Capital Management, LLC
How is the ownership percentage in a hedge fund determined?
By the amount of contribution
By the number of shares
By the duration of investment
By the investor's age
What is the management fee percentage assumed in the example?
1%
2%
5%
10%
What is another term for performance fees?
Brokerage fees
Management fees
Carried interest
Trading fees
How much did Pete Capital Management earn in performance fees?
$5 million
$3.56 million
$6 million
$2.2 million
What type of investors can hedge funds accept money from?
Accredited investors
Non-profit organizations
Retail investors
Government entities
When can investors typically redeem their interests in a hedge fund?
Only at the end of the year
At the end of the month, quarter, or year
Only at the beginning of the year
Anytime
What happens to the fund's value when an investor redeems part of their interest?
It decreases
It remains the same
It increases
It doubles
What is the fund's value after an investor with 30% interest redeems 10%?
$100 million
$114.24 million
$102.816 million
$120 million
