IMC Asset Classes 3

Question 1

What is 'private equity' as an asset class?

Accepted Answer

Investment in companies that are not listed on public stock exchanges, typically seeking capital growth

Answer

Private equity involves investing in companies not listed on public stock exchanges. It includes venture capital (early-stage), growth equity, and buyouts (mature companies). Returns come from capital appreciation over a medium to long-term horizon.

Question 2

What is 'infrastructure' as an alternative asset class?

Accepted Answer

Long-term investments in physical assets such as roads, bridges, airports, and utilities

Answer

Infrastructure as an asset class involves investing in physical systems and facilities such as transport networks, utilities, energy, and social infrastructure. It typically offers stable, long-term, inflation-linked returns and low correlation with equities.

Question 3

What is a 'commodity' in investment terms?

Accepted Answer

A raw material or primary agricultural product that can be bought and sold, such as gold, oil, or wheat

Answer

Commodities are standardised physical goods (hard commodities like metals and energy; soft commodities like agricultural products) that are traded on exchanges. Investors access them through futures contracts, ETFs, or shares in commodity producers.

Question 4

What is the key risk associated with investing in property as an asset class?

Accepted Answer

Illiquidity — property is slow and expensive to buy and sell

Answer

Property is an illiquid asset class — transactions are slow, costly (stamp duty, legal fees, agent fees), and cannot be partially sold. This makes it difficult to quickly exit a position or rebalance a portfolio compared to listed securities.

Question 5

What is an ETF (Exchange-Traded Fund)?

Accepted Answer

A fund that trades on a stock exchange, typically tracking an index, combining features of both funds and shares

Answer

An ETF is a fund listed and traded on a stock exchange throughout the trading day, unlike traditional open-ended funds priced once daily. Most ETFs passively track an index (equities, bonds, commodities), offering low cost and intraday liquidity.

IMC Practice Test

IMC Practice Test

IMC Asset Classes 3