CFS Alternative Investments 2

Question 1

Real estate investment through a Real Estate Limited Partnership (RELP) primarily offers investors:

Accepted Answer

Pass-through income and potential tax benefits with limited liability

Answer

RELPs allow investors to receive pass-through income and depreciation benefits while limiting personal liability to their invested capital amount.

Question 2

Commodity futures contracts are used in portfolio management primarily to:

Accepted Answer

Provide inflation hedging and diversification through non-correlated returns

Answer

Commodities often move independently of stocks and bonds and historically provide a hedge against inflation, making them useful for diversification.

Question 3

A 'venture capital' fund most commonly invests in:

Accepted Answer

Early-stage or startup companies with high growth potential

Answer

Venture capital funds focus on providing capital to early-stage companies in exchange for equity, accepting high risk in pursuit of potentially high returns.

Question 4

Which of the following best describes a 'high-water mark' provision in a hedge fund?

Accepted Answer

A threshold ensuring performance fees are only paid on new net profits above previous peak NAV

Answer

A high-water mark ensures managers only collect performance fees when the fund exceeds its previous highest NAV, preventing double-charging for recovering lost ground.

Question 5

Managed futures funds primarily derive returns by:

Accepted Answer

Trading futures contracts across asset classes based on systematic trend-following or discretionary strategies

Answer

Managed futures funds use systematic or discretionary approaches to trade futures contracts on commodities, currencies, interest rates, and equity indices.

CFS - Certified Fund Specialist Practice Test

CFS - Certified Fund Specialist Practice Test

CFS Alternative Investments 2