IFC Alternative Managed Products 2

Question 1

Under NI 81-102, which regulatory change in 2019 allowed retail investors in Canada to access hedge-fund-like strategies through conventional mutual funds?

Accepted Answer

Creation of the alternative mutual fund category

Answer

The 2019 amendments to NI 81-102 established the 'alternative mutual fund' category, allowing retail investors to access liquid alternative strategies within a regulated mutual fund wrapper.

Question 2

An alternative mutual fund in Canada may use leverage up to what maximum gross exposure relative to its net asset value?

Accepted Answer

300%

Answer

NI 81-102 permits alternative mutual funds to leverage up to 300% of NAV through borrowing, short selling, and derivatives combined.

Question 3

Which of the following best describes a 'commodity pool' under Canadian securities regulation?

Accepted Answer

A mutual fund that invests primarily in physical commodities or commodity futures

Answer

A commodity pool is a mutual fund that primarily invests in physical commodities, commodity futures, or other commodity-related derivatives.

Question 4

A hedge fund charges a 2% management fee and a 20% performance fee with a high-water mark. If the fund loses 15% in year one and gains 25% in year two, in which year does the manager collect the performance fee?

Accepted Answer

Year two only, but only on gains above the previous high-water mark

Answer

The high-water mark ensures the performance fee is only charged on gains that exceed the fund's previous peak NAV, so no fee is earned until losses are recovered.

Question 5

Which distribution channel is most commonly used for hedge funds sold to Canadian retail investors seeking liquid alternative exposure?

Accepted Answer

Alternative mutual funds distributed under a simplified prospectus

Answer

Since 2019, alternative mutual funds filed under a simplified prospectus provide retail investors with liquid, regulated access to hedge-fund strategies.

IFC - Investment Funds in Canada Practice Test

IFC - Investment Funds in Canada Practice Test

IFC Alternative Managed Products 2