Fund Administration & Operations Flashcards
7 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Fund Administration & Operations flashcards as text
Which document serves as the primary legal contract between a hedge fund and its investors, outlining rights, fees, and redemption terms?
Answer: Limited Partnership Agreement
The Limited Partnership Agreement is the foundational legal document governing the relationship between the general partner and limited partners in a hedge fund.
A fund administrator performs a 'shadow NAV' calculation. What is the primary purpose of this process?
Answer: To independently verify the manager's NAV calculation
Shadow NAV allows the administrator to independently cross-check the investment manager's own NAV calculation, providing an important control against errors or fraud.
Under U.S. regulations, which entity is generally required to register as a transfer agent for a mutual fund?
Answer: The entity that maintains shareholder records and processes transactions
Transfer agents, which maintain shareholder records, process purchases and redemptions, and handle distributions, must register with the SEC under the Securities Exchange Act of 1934.
What is a 'gate provision' in a hedge fund limited partnership agreement?
Answer: A restriction limiting the total redemptions processed in a given period
A gate provision allows a fund manager to limit redemptions in any given period—often expressed as a percentage of NAV—to protect remaining investors from forced asset liquidations.
In fund operations, what does 'T+1 settlement' mean for a mutual fund redemption?
Answer: The investor receives redemption proceeds one business day after the trade date
T+1 settlement means the investor receives their redemption proceeds one business day after the trade date on which their redemption was processed.
Which of the following best describes the role of a 'paying agent' in a fund structure?
Answer: An entity responsible for distributing dividends and other payments to shareholders
A paying agent handles the actual disbursement of dividends, interest, and redemption proceeds to shareholders or beneficial owners on behalf of the fund.
What is the purpose of a 'reconciliation' process in daily fund operations?
Answer: To match fund holdings and cash balances across multiple records to identify and resolve discrepancies
Reconciliation compares records from the custodian, prime broker, and administrator to ensure all holdings and cash balances agree, catching errors before NAV is published.