Alternative Investments Flashcards

An investor in a private equity fund is said to be in the 'blind pool' stage when:

Answer: Capital is committed before specific investments are identified

Blind pool funds collect investor capital commitments before the manager has identified the specific investments to be made.

Which metric is most commonly used to evaluate private equity fund performance net of fees?

Answer: Internal Rate of Return (IRR)

IRR is the standard performance metric for private equity, capturing the time-weighted cash flows of capital calls and distributions over the fund's life.

In the context of managed futures, a trend-following CTA strategy generates returns primarily by:

Answer: Taking positions aligned with persistent price trends in futures markets

Trend-following CTAs use systematic models to identify and ride sustained price trends across futures markets in equities, bonds, currencies, and commodities.

Which type of real estate investment trust (REIT) directly owns and operates income-producing properties?

Answer: Equity REIT

Equity REITs own and manage physical real estate properties, generating income through rents collected from tenants.

A CIMA professional discussing liquidity risk with a client regarding hedge funds should note that lock-up periods:

Answer: Restrict investor redemptions for a specified initial period after investment

Lock-up periods prevent investors from withdrawing capital for a set time, allowing managers to invest in illiquid strategies without forced selling.

Infrastructure investments are often attractive to institutional investors because they typically offer:

Answer: Long-duration, inflation-linked cash flows with low correlation to equities

Infrastructure assets like toll roads and utilities generate predictable, long-term cash flows that are often contractually tied to inflation, providing stable returns.