CMFAS Collective Investment Schemes M3 4

Question 1

What is an index fund?

Accepted Answer

A fund that tracks and replicates the performance of a specific market index

Answer

An index fund is a passively managed fund that seeks to replicate the performance of a specific market index, such as the Straits Times Index.

Question 2

What is the difference between active and passive fund management?

Accepted Answer

Active managers try to outperform the market; passive managers track an index

Answer

Active management involves selecting investments to beat a benchmark, while passive management replicates an index. Active funds typically have higher fees.

Question 3

What are the key risks associated with investing in a CIS?

Accepted Answer

Market risk, liquidity risk, currency risk, and manager risk

Answer

CIS investments face multiple risks including market risk (prices fall), liquidity risk (unable to sell), currency risk (exchange rate changes), and manager risk (poor decisions).

Question 4

What is a hedge fund?

Accepted Answer

An alternative investment fund that uses advanced strategies to generate returns

Answer

Hedge funds use advanced investment strategies such as leverage, short selling, and derivatives to seek absolute returns regardless of market conditions.

Question 5

What is the minimum subscription amount for a restricted CIS in Singapore?

Accepted Answer

$200,000

Answer

A restricted CIS can only be offered to accredited investors or in minimum subscription amounts of $200,000 or more.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Collective Investment Schemes M3 4