CFS Alternative Investments

Question 1

Which characteristic most distinguishes alternative investments from traditional investments?

Accepted Answer

Low correlation with traditional asset classes

Answer

Higher dividend yields

Answer

Guaranteed principal protection

Answer

Daily liquidity and transparency

Question 2

A hedge fund that uses the 'long/short equity' strategy will typically:

Accepted Answer

Buy stocks expected to rise and short-sell stocks expected to fall

Answer

Only buy undervalued stocks and hold them long-term

Answer

Invest exclusively in government bonds

Answer

Track a benchmark index with minimal deviation

Question 3

Private equity funds differ from public equity primarily because they:

Accepted Answer

Invest in companies not listed on public exchanges

Answer

Offer daily NAV pricing and redemptions

Answer

Are regulated under the Investment Company Act of 1940

Answer

Provide FDIC insurance on invested capital

Question 4

What is the typical 'two and twenty' fee structure in a hedge fund?

Accepted Answer

2% management fee on AUM and 20% performance fee on profits

Answer

2% sales load and 20% annual maintenance fee

Answer

20% upfront fee and 2% redemption fee

Answer

2% advisory fee and a 20% dividend reinvestment charge

Question 5

A 'fund of funds' in the context of alternative investments refers to:

Accepted Answer

A pooled vehicle that invests in multiple underlying hedge funds or private equity funds

Answer

A mutual fund that invests only in bond funds

Answer

An ETF that tracks an index of alternative asset managers

Answer

A closed-end fund with a fixed number of shares

Question 6

Which investor classification typically permits participation in hedge funds and other private placement offerings under SEC regulations?

Accepted Answer

Accredited investors meeting income or net worth thresholds

Answer

Retail investors with basic brokerage accounts

Answer

All investors with a completed risk tolerance questionnaire

Answer

Only institutional investors such as pension funds

Question 7

What is a 'lock-up period' in a hedge fund?

Accepted Answer

A minimum holding period during which investors cannot redeem their capital

Answer

The time required to complete an investor's KYC verification

Answer

A period during which the fund manager is prohibited from trading

Answer

The duration required before performance fees are calculated