Investment Vehicles and Strategies Flashcards
7 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Investment Vehicles and Strategies flashcards as text
Which of the following best describes the J-curve effect in private equity investing?
Answer: Early negative returns due to fees and capital calls before investments appreciate
The J-curve reflects negative early returns caused by management fees and unrealized investments, followed by positive returns as companies appreciate and are exited.
A variable annuity subaccount differs from a mutual fund primarily because:
Answer: It is held within an insurance wrapper providing tax deferral
Variable annuity subaccounts function similarly to mutual funds but are held within an insurance contract, providing tax-deferred growth.
In a real estate investment trust (REIT), the 90% distribution requirement refers to:
Answer: At least 90% of taxable income must be distributed to shareholders to maintain REIT status
To qualify for pass-through tax treatment, REITs must distribute at least 90% of their taxable income to shareholders.
Which of the following is a characteristic of a global macro hedge fund strategy?
Answer: Uses top-down analysis to take leveraged positions across asset classes and currencies based on macroeconomic views
Global macro funds use top-down macroeconomic analysis to take directional positions in currencies, bonds, equities, and commodities across global markets.
A pension fund allocates 5% to infrastructure investments. Which characteristic makes infrastructure particularly attractive for pension funds?
Answer: Long-duration, inflation-linked cash flows that match pension liabilities
Infrastructure assets often generate stable, long-duration cash flows with inflation linkage, making them well-suited to match long-term pension liabilities.
An exchange-traded note (ETN) differs from an ETF in that an ETN:
Answer: Is an unsecured debt obligation of the issuer with no underlying basket of assets
ETNs are unsecured debt instruments issued by financial institutions that promise to pay an index-linked return, exposing investors to issuer credit risk.
In options-based portfolio protection, a protective put strategy is equivalent to:
Answer: A long call option combined with a risk-free bond (put-call parity)
By put-call parity, owning the underlying plus a put equals a long call plus a risk-free bond, making these positions economically equivalent.