IFC Alternative Managed Products 5

Question 1

A managed futures fund predominantly trades exchange-traded commodity and financial futures contracts using systematic, trend-following models. This strategy is often called:

Accepted Answer

Commodity trading advisor (CTA) or trend-following strategy

Answer

Managed futures funds operated by commodity trading advisors typically use quantitative, trend-following algorithms to take long or short positions across diversified futures markets.

Question 2

One commonly cited benefit of managed futures strategies in a diversified portfolio is that they have historically shown:

Accepted Answer

Low or negative correlation with traditional equities, especially during equity market crises

Answer

Managed futures have historically exhibited crisis alpha — tending to perform well or exhibit low correlation to equities during sharp equity market downturns — improving portfolio diversification.

Question 3

The 'hurdle rate' in a hedge fund performance fee arrangement refers to:

Accepted Answer

The minimum return the fund must achieve before the performance fee begins to accrue

Answer

A hurdle rate sets a return threshold (often linked to a benchmark such as a T-bill rate) that the fund must exceed before the manager earns any performance fee.

Question 4

Under the client-focused reforms (CFRs) effective in Canada since 2021, a registrant recommending an alternative managed product must ensure the recommendation:

Accepted Answer

Is in the best interest of the client and suitable given their complete financial profile

Answer

The CFRs introduced a best-interest-aligned suitability standard requiring registrants to put clients' interests first when making product recommendations, including alternative products.

Question 5

An investor comparing two alternative mutual funds notices Fund A uses a 'master-feeder' structure while Fund B is a stand-alone fund. What is the primary purpose of a master-feeder structure?

Accepted Answer

To pool assets from multiple feeder funds into a single master fund for economies of scale and centralized portfolio management

Answer

A master-feeder structure routes assets from multiple feeder funds (each serving different investor types or jurisdictions) into a single master fund, reducing trading costs and simplifying portfolio management.

IFC - Investment Funds in Canada Practice Test

IFC - Investment Funds in Canada Practice Test

IFC Alternative Managed Products 5