Practice Test Geeks(CFM) Certified Fund Manager Practice Test
← All CFM Flashcard Decks

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

  1. In a fund of funds structure, what is 'double layering of fees' and why is it a concern for investors?

    Answer: Paying management and performance fees at both the fund of funds level and the underlying fund level, compounding the fee burden

    Fund of funds investors bear the fees of the fund of funds manager plus the fees of each underlying fund, significantly eroding net returns compared to direct fund investment.

  2. What is the primary function of a fund's 'compliance calendar' in daily operations?

    Answer: To track regulatory filing deadlines, portfolio restriction tests, and required disclosures to ensure timely compliance

    A compliance calendar centralizes all regulatory deadlines, portfolio constraint monitoring dates, and required reporting obligations to prevent violations from missed deadlines.

  3. Under FATCA, what obligation does a foreign fund administrator have when dealing with U.S. investors?

    Answer: Identify and report U.S. account holders to the IRS or local tax authority under an IGA

    Under FATCA, Foreign Financial Institutions (FFIs) must identify U.S. account holders and report their account information to the IRS, either directly or through their local government under an Intergovernmental Agreement (IGA).

  4. A hedge fund's high-water mark stands at $110 per share. The current NAV falls to $90. Which statement is correct regarding performance fees?

    Answer: No performance fees are earned until NAV exceeds $110 per share

    The high-water mark ensures the manager earns performance fees only after recovering all previous losses; the NAV must exceed $110 before any incentive fee is charged.

  5. Which of the following is a key operational consideration when a fund transitions from one administrator to another?

    Answer: Ensuring complete and accurate transfer of all historical records, positions, and investor data

    A clean data migration—including historical NAV records, investor registers, position history, and tax information—is the most critical operational requirement in an administrator transition.

  6. What is the role of an 'independent valuation agent' in hedge fund operations?

    Answer: To provide third-party pricing for complex, illiquid, or hard-to-value securities

    An independent valuation agent provides objective, third-party pricing for Level 2 and Level 3 assets where market prices are unavailable or unreliable, reducing conflicts of interest.

  7. In U.S. registered fund operations, what is 'revenue sharing' in the context of fund distribution?

    Answer: Payments made by the fund or its adviser to broker-dealers in exchange for preferred shelf space or sales support

    Revenue sharing involves payments from the fund complex or adviser to distribution intermediaries as compensation for platform access, sales support, or marketing, raising conflict-of-interest concerns.