CIM CIM Alternative Investments

Question 1

Which characteristic most distinguishes alternative investments from traditional asset classes?

Accepted Answer

Low correlation with public equities and bonds

Answer

Alternative investments typically exhibit low correlation with traditional asset classes, making them valuable for portfolio diversification.

Question 2

A hedge fund employing a long/short equity strategy aims to profit by:

Accepted Answer

Buying undervalued stocks and short-selling overvalued stocks simultaneously

Answer

Long/short equity strategies seek alpha by taking long positions in undervalued securities and short positions in overvalued ones.

Question 3

Private equity buyout funds primarily create value by:

Accepted Answer

Acquiring companies, improving operations, and selling at a profit

Answer

Buyout funds acquire companies using leverage and operational improvements to increase value before exiting through a sale or IPO.

Question 4

The J-curve effect in private equity refers to:

Accepted Answer

Initial negative returns followed by positive returns as investments mature

Answer

The J-curve describes the pattern where early fees and capital calls produce negative returns before investments mature and generate positive gains.

Question 5

Real assets as an alternative investment class include which of the following?

Accepted Answer

Infrastructure, commodities, and timberland

Answer

Real assets encompass physical or tangible assets such as infrastructure, commodities, real estate, and natural resources.

CIM - Chartered Investment Manager Practice Test