CIMA Alternative Investments 2

Question 1

What is the J-curve effect commonly observed in private equity fund performance?

Accepted Answer

Early negative returns followed by positive returns as investments mature

Answer

Steady linear growth over the fund's life

Answer

Immediate positive returns that taper off over time

Answer

Volatile returns that mirror public market fluctuations

Question 2

A commodity pool operator (CPO) manages a fund that trades futures contracts on agricultural commodities. Under US regulations, the CPO must register with:

Accepted Answer

The Commodity Futures Trading Commission (CFTC) and NFA

Answer

The Securities and Exchange Commission (SEC) only

Answer

FINRA as a broker-dealer

Answer

The Federal Reserve Board

Question 3

Which hedge fund strategy attempts to profit from pricing discrepancies between convertible bonds and the underlying equity?

Accepted Answer

Convertible arbitrage

Answer

Global macro

Answer

Event-driven

Answer

Managed futures

Question 4

In private real estate investing, the term 'cap rate' refers to:

Accepted Answer

Net operating income divided by property value

Answer

Total debt divided by property equity

Answer

Annual appreciation divided by purchase price

Answer

Gross rental income divided by total expenses

Question 5

Which of the following best describes a fund of funds in the context of alternative investments?

Accepted Answer

A fund that invests in a portfolio of other hedge funds or private equity funds

Answer

A mutual fund that holds only large-cap equities

Answer

A fund restricted to government securities and agency bonds

Answer

A single-strategy hedge fund with multiple sub-accounts

Question 6

From a CIMA perspective, what is the primary due diligence concern when recommending a hedge fund with a high-water mark provision?

Accepted Answer

The manager only earns incentive fees when returns exceed the previous peak NAV

Answer

The fund automatically redeems if NAV falls below the high-water mark

Answer

High-water marks eliminate all management fees during drawdowns

Answer

Investors can exit penalty-free once the high-water mark is reached