CFM Cheat Sheet 2026

The 30 highest-yield CFM facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Regulation D (Reg D) in the US primarily allows hedge funds to: → Raise capital from accredited investors without SEC registration
2. An investor requests side-letter provisions granting most-favored-nation (MFN) status. What does this primarily entitle the investor to? → Access to any more favorable terms granted to other investors
3. A basis swap involves the exchange of: → Two different floating rate payments
4. What does the VIX index primarily measure? → Expected volatility of S&P 500 over the next 30 days
5. An asset allocation model shows a portfolio has a maximum drawdown of -35%. This metric represents: → The peak-to-trough decline in portfolio value over a specified period
6. Under the Dodd-Frank Act, which category of investment adviser was newly required to register with the SEC that was previously exempt? → Advisers to private funds with at least $150 million in AUM
7. Why is ethical behavior critical in investment management? → It supports long-term client relationships and fiduciary duties
8. Which regulatory framework specifically governs the custody of assets for U.S. registered investment advisers managing client funds? → Investment Advisers Act of 1940, Rule 206(4)-2 (the 'Custody Rule')
9. What is negative convexity, commonly found in mortgage-backed securities (MBS)? → Price gains are smaller than duration predicts when rates fall, due to prepayment risk
10. What is modified duration used for in fixed income portfolio management? → Estimating the percentage price change of a bond for a given change in yield
11. What is the main objective of financial regulations? → To ensure transparency and protect investors
12. Which economic concept describes the additional output generated by employing one more unit of a factor of production? → Marginal product
13. Which of the following best describes theta in options pricing? → The rate at which an option loses value due to the passage of time
14. What is the primary purpose of the Securities and Exchange Commission (SEC) in US financial markets? → Protecting investors and maintaining fair, orderly markets
15. A fund's 'drawdown' is defined as: → The peak-to-trough decline in fund NAV before a new high is reached
16. What does a p-value below 0.05 indicate in hypothesis testing for a fund performance study? → The result is statistically significant at the 5% significance level
17. In a scenario where an investor expects equity markets to decline significantly, which portfolio adjustment is most appropriate? → Shift allocation toward defensive sectors and increase cash holdings
18. In the context of portfolio construction, what is the efficient frontier? → The set of portfolios with the highest return for any given level of risk
19. Under the Global Investment Performance Standards (GIPS), composite performance must include: → All fee-paying discretionary accounts managed to a similar strategy
20. In foreign exchange markets, a country's currency appreciates when: → Its interest rates rise relative to trading partners
21. Which type of private equity strategy typically operates with the shortest holding period and highest leverage? → Distressed debt investing
22. Which law aims to combat insider trading? → Securities Exchange Act of 1934
23. Which of the following is a key operational control in hedge fund administration to prevent NAV manipulation? → Independent fund administrator calculating NAV separately from the manager
24. Which of the following is a component of the Capital Asset Pricing Model (CAPM)? → Risk-free rate
25. Which regulation requires investment advisers to disclose conflicts of interest? → Investment Advisers Act of 1940
26. Put-call parity for European options states that: → C - P = S - PV(K)
27. The ethical principle of 'independence and objectivity' in fund management is most threatened when a manager: → Accepts excessive compensation or gifts that could influence investment recommendations
28. The delta of a deep in-the-money call option approaches: → 1
29. Which operational risk is most directly mitigated by requiring dual authorization (four-eyes principle) for wire transfers? → Fraud or unauthorized disbursement of fund assets
30. Which ESG data challenge is most commonly cited by institutional fund managers? → Lack of corporate ESG disclosure and inconsistent data