CSC Alternative Investments

Question 1

Which of the following is considered an alternative investment?

Accepted Answer

Hedge funds

Answer

Government of Canada bonds

Answer

TSX-listed common shares

Answer

GICs from a chartered bank

Question 2

A hedge fund that uses a 'long/short equity' strategy will:

Accepted Answer

Buy securities expected to rise and short-sell securities expected to fall

Answer

Only purchase undervalued stocks and hold them indefinitely

Answer

Invest exclusively in fixed-income instruments with leverage

Answer

Replicate a benchmark index using futures

Question 3

Private equity investments are typically characterized by:

Accepted Answer

Illiquidity and long investment horizons of 5–10 years

Answer

Daily liquidity and exchange-listed trading

Answer

Investment in publicly traded companies only

Answer

Regulatory limits of $5,000 minimum investment

Question 4

What is a 'fund of hedge funds'?

Accepted Answer

A fund that allocates capital across multiple underlying hedge funds

Answer

A hedge fund that invests in government bonds using leverage

Answer

A mutual fund that replicates hedge fund strategies without restrictions

Answer

A closed-end fund traded on a stock exchange

Question 5

The '2 and 20' fee structure commonly used by hedge funds refers to:

Accepted Answer

2% management fee and 20% performance fee on profits

Answer

2% sales charge and 20% redemption fee

Answer

20% management fee and 2% expense ratio

Answer

2% minimum return guarantee and 20% fund size limit

Question 6

Which term describes the minimum return a hedge fund must achieve before collecting its performance fee?

Accepted Answer

Hurdle rate

Answer

High-water mark

Answer

Sharpe ratio

Answer

Alpha