ACCAspace_sitemap
PPclass_sitemap
sitemap_google
sitemap_baidu
CFA Forums
返回列表 发帖
 

2 Fullen Capital Management recently started a convertible bond arbitrage hedge fund and is looking to market the fund to investors with traditional stock and bond portfolios. Based on the characteristics of similar funds, Fullen expects his hedge fund to have high returns and a relatively high correlation with a traditional stock and bond portfolio. In his marketing materials, Fullen would most accurately categorize the fund as a:

A) total diversifier.

B) return enhancer. 

C) risk reducer.

D) pure diversifier. 

TOP

 

The correct answer is B

Hedge funds classified as return enhancers have high returns and high correlations with traditional stock and bond portfolios.


TOP

 

3、Which of the following statements best describes the fund-of-funds (FOF) class of hedge funds? A fund of funds:

A) is an open-end mutual fund that primarily invests in other open-end funds.

B) allows smaller investors to access the hedge funds market.

C) is open to institutional investors for the purpose of seeking arbitrage situations in hedge fund pricing.

D) allows smaller investors to participate in the venture capital market.

TOP

 

The correct answer is B

A FOF is a fund that invests in hedge funds. They are open to both individual and institutional investors.


TOP

 

6、In distinguishing between strategy risks and structural risks that stem from a fund of hedge funds, which of the following would be considered strategy risk(s)?

  I. Trading liquidity risk.

 II. The extent and form of management oversight.

III. The risk of poor information reporting systems.

IV. The risk of high ownership concentration of hedge fund shares.

A) I, III and IV. 

B) II and III. 

C) II and IV. 

D) I only. 

TOP

 

The correct answer is D

Hedge funds face structural risks that stem from a hedge fund’s operations. These risks include the potential for deterioration in a firm’s reputation, poor information reporting systems, inadequate management oversight, etc. Strategy risks derive from a hedge fund’s investment strategy. They include a fund’s exposure to price swings from different asset classes (market risk), the risk of non-performance by counterparties (credit risk), the risk of price impact from executing large trades (trading liquidity risk), and the risk of not being able to meet interim cash flows obligations before strategies are able to become profitable (funding liquidity risk).


TOP

 

AIM 2: Explain how funds of hedge funds can be classified according to diversification characteristics.

1、A risk reducer hedge fund is characterized by:

A) low returns and low positive correlation with traditional asset classes.

B) high returns and high positive correlation with traditional asset classes. 

C) high returns and negative correlation with traditional asset classes. 

D) low returns and negative correlation with traditional asset classes.

TOP

 

The correct answer is A

A risk reducer hedge fund is characterized by lower returns, and low correlations with traditional stock/bond asset classes. One example is a long/short equity fund.


TOP

 

4、William Jones, CFA, has a client who wants to invest in a hedge fund. Jones might recommend a fund of funds instead of a single fund for all of the following reasons EXCEPT a fund of funds:

A) would be more liquid. 

B) would have a lower correlation with equity markets. 

C) offers diversification. 

D) may serve as a better indicator of aggregate performance of hedge funds.

TOP

 

The correct answer is B

Fund of funds are usually considered good choices for individual investors because they offer diversification, usually offer more liquidity, and suffer from less survivorship bias thus they may serve as a better indicator of aggregate performance of hedge funds. One problem with fund of funds is that they are usually more correlated with equity markets than an individual fund, and this lowers their ability to diversify the overall portfolio.


TOP

返回列表