Investment Jobs Alternative Investments Test 1

Question 1

Which type of alternative investment involves buying controlling interests in private companies with the intent to improve and sell them?

Accepted Answer

Private equity (buyout funds)

Answer

Hedge funds

Answer

Venture capital

Answer

Real estate investment trusts

Question 2

What is the standard fee structure for most hedge funds (the '2 and 20' model)?

Accepted Answer

2% management fee and 20% performance fee on profits

Answer

2% sales load and 20% expense ratio

Answer

2% front-end load and 20% back-end redemption fee

Answer

2% annual return floor and 20% leverage cap

Question 3

What is a Real Estate Investment Trust (REIT) and what tax advantage does it offer?

Accepted Answer

A publicly traded company that owns income-producing real estate; must distribute 90% of taxable income to avoid corporate tax

Answer

A private real estate partnership; no special tax treatment

Answer

A real estate mutual fund; gains are tax-deferred

Answer

A government bond backed by real estate; tax-exempt interest

Question 4

In venture capital, what does 'Series A' funding typically represent?

Accepted Answer

The first significant round of institutional financing after early-stage proof of concept

Answer

The initial seed investment from founders

Answer

The pre-IPO round of financing

Answer

Government grants for startups

Question 5

What is 'carried interest' in private equity and hedge funds?

Accepted Answer

The fund manager's share of profits above a specified return threshold

Answer

Interest earned on uninvested capital held in escrow

Answer

Interest costs on leverage used in buyouts

Answer

The annual management fee expressed as an interest rate

Question 6

Which type of hedge fund strategy aims to profit regardless of market direction by being simultaneously long and short?

Accepted Answer

Long/short equity strategy

Answer

Global macro strategy

Answer

Event-driven strategy

Answer

Fixed income arbitrage