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

Private equity funds typically show negative early returns due to fees and unrealized losses, then generate positive returns as portfolio companies mature and are exited.

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

Commodity pool operators must register with the CFTC and become members of the National Futures Association (NFA) under the Commodity Exchange Act.

Question 3

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

Accepted Answer

Convertible arbitrage

Answer

Convertible arbitrage involves buying convertible bonds and shorting the underlying stock to exploit mispricing between the two related securities.

Question 4

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

Accepted Answer

Net operating income divided by property value

Answer

The capitalization rate (cap rate) equals net operating income divided by the current market value, serving as a key real estate valuation metric.

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 fund of funds aggregates capital to invest across multiple underlying alternative funds, providing diversification and manager access at the cost of an additional fee layer.

(CIMA) Certified Investment Management Analyst Practice Test

(CIMA) Certified Investment Management Analyst Practice Test

CIMA Alternative Investments 2