CAIA CAIA Alternative Investment Vehicles 1

Question 1

What is a Special Purpose Vehicle (SPV) primarily used for in alternative investments?

Accepted Answer

To isolate assets and liabilities for a specific transaction or investment

Answer

An SPV is a legal entity created to isolate financial risk by holding specific assets or liabilities separate from a parent company.

Question 2

Which structure is most commonly used by US-domiciled hedge funds to accommodate tax-exempt domestic investors?

Accepted Answer

Limited partnership onshore feeder

Answer

Tax-exempt US investors (e.g., pension funds) typically invest through an onshore limited partnership feeder to avoid UBTI issues.

Question 3

A Business Development Company (BDC) is required to invest at least what percentage of its assets in qualifying assets?

Accepted Answer

70%

Answer

Under the Investment Company Act of 1940, BDCs must invest at least 70% of total assets in qualifying assets, primarily private or small public companies.

Question 4

Which of the following best describes a Interval Fund structure?

Accepted Answer

A fund that offers periodic but limited liquidity windows rather than daily redemptions

Answer

Interval funds provide liquidity only at set intervals (e.g., quarterly), making them suitable for holding less liquid alternative assets.

Question 5

In a fund-of-funds structure, the primary benefit to investors is:

Accepted Answer

Diversification across multiple underlying managers

Answer

Fund-of-funds provide access to multiple managers and strategies, reducing manager-specific risk through diversification.

CAIA - Chartered Alternative Investment Analyst Association Practice Test

CAIA - Chartered Alternative Investment Analyst Association Practice Test

CAIA CAIA Alternative Investment Vehicles 1