CAIA CAIA Alternative Investment Vehicles 3

Question 1

In a master-feeder fund structure, where does the actual trading of securities occur?

Accepted Answer

In the master fund

Answer

In each feeder fund separately

Answer

On a centralized exchange

Answer

In the general partner's separate account

Question 2

Which of the following is a key disadvantage of investing in a fund-of-hedge-funds?

Accepted Answer

Double layer of fees reducing net returns

Answer

Lack of diversification across strategies

Answer

Inability to access top-tier managers

Answer

No regulatory oversight

Question 3

A separately managed account (SMA) in alternatives differs from a commingled fund primarily because:

Accepted Answer

SMAs give the investor direct ownership of the underlying assets

Answer

SMAs pool capital from multiple investors

Answer

SMAs have lower minimum investment requirements

Answer

SMAs are not subject to any fees

Question 4

Which type of alternative investment vehicle is most suitable for an endowment seeking illiquidity premium with a 20-year investment horizon?

Accepted Answer

Long-dated unlisted infrastructure or private equity fund

Answer

Daily-redeemable money market fund

Answer

Exchange-traded note (ETN)

Answer

Interval fund with quarterly redemptions

Question 5

Under SEC Regulation D, what exemption do most US private funds rely on to avoid registering their securities offerings?

Accepted Answer

Rule 506(b) or 506(c) of Regulation D

Answer

Rule 144A for qualified institutional buyers only

Answer

Section 4(a)(5) small offering exemption

Answer

Regulation A+ for offerings under $75 million

Question 6

A SPAC (Special Purpose Acquisition Company) generates returns for investors primarily through:

Accepted Answer

Capital appreciation following a successful merger with a target company

Answer

Ongoing dividend income from portfolio companies

Answer

Fixed coupon payments from bond holdings

Answer

Short selling of overvalued equities