Reading 47: Introduction to Alternative Investments

Which of the following characteristics is most commonly associated with alternative investments compared to traditional investments?

An investor wanting to participate in alternative investments while minimizing fees would most likely prefer which investment method?

In a limited partnership structure for alternative investments, the Limited Partners (LPs) typically:

A private equity fund charges a management fee of 2 percent. This fee is most likely calculated based on:

In the context of incentive fees, a 'soft hurdle rate' means that:

A catch-up clause in a private equity partnership agreement typically benefits the:

Which waterfall structure is most advantageous to the General Partner?

A clawback provision in a private equity fund is designed to:

A hedge fund has a '1 and 20' fee structure with a high-water mark. The fund has a NAV of 100 million at the start of the year and 110 million at year-end (before fees). The previous high-water mark was 115 million. What is the total fee paid?

A fund has a committed capital of 100 million and invested capital of 40 million. If the management fee is 1.5 percent based on committed capital, what is the annual management fee?

A hedge fund strategy that seeks to profit from pricing discrepancies between related securities is best classified as:

An 'Activist Shareholder' hedge fund strategy is most likely a subcategory of:

Which bias typically results in hedge fund indices reporting higher returns and lower risk than is actually realized by investors?

Backfill bias in hedge fund indices refers to:

A 'lockup period' for a hedge fund is best described as the time during which:

The primary disadvantage of investing in a fund-of-funds compared to a single hedge fund is:

In the context of venture capital, 'angel investing' typically occurs during which stage?

Mezzanine-stage financing in venture capital is primarily used to:

A 'trade sale' exit strategy in private equity involves:

Private debt investment that involves purchasing the debt of companies in bankruptcy is known as:

In commodity valuation, if the convenience yield is high, the market is likely in:

Which of the following is defined as the value of having physical possession of a commodity?

Investments in infrastructure assets that are yet to be constructed are referred to as:

Compared to greenfield investments, brownfield infrastructure investments typically offer:

The return measure that substitutes downside deviation for standard deviation is the:

The Calmar ratio is calculated as average annual compound return divided by:

If a hedge fund has a return distribution with significant negative skewness, the Sharpe ratio will likely:

An investor invests 100 million in a hedge fund with a '2 and 20' fee structure (2 percent management fee, 20 percent incentive fee). The management fee is calculated on year-end AUM. The fund earns a 10 percent gross return in Year 1. There is no hurdle rate. What is the investor's return after fees?

A 'hard hurdle rate' of 5 percent with a 20 percent incentive fee implies that:

Which real estate index type is most likely to underestimate volatility due to infrequent data points?

Timberland returns are driven by all of the following EXCEPT:

In a 'Management Buyout' (MBO), the buyers of the company are:

Which of the following describes a 'Convertible Arbitrage' hedge fund strategy?

The 'dry powder' of a private equity fund refers to:

Which type of infrastructure investment involves the highest degree of construction risk?

A 'Market Neutral' equity hedge fund strategy attempts to:

Which of the following is a quantitative directional strategy?

What is the key difference between a 'management fee' and an 'incentive fee'?

A fund with a 100 million investment grows to 120 million. The hurdle rate is 8 percent (hard). The incentive fee is 20 percent. What is the incentive fee?

Real Estate Investment Trusts (REITs) are typically:

Which of the following is considered a 'social infrastructure' asset?

The price of a forward contract on a commodity with zero storage costs and zero convenience yield should be:

A 'Notice Period' refers to the time:

Which ratio uses 'beta' as the measure of risk in the denominator?

If returns on alternative investments are smoothed (e.g., via appraisal), the correlation with traditional assets will likely be:

In a 'fund-of-funds' with a 1 and 10 fee structure investing in funds with 2 and 20 structures, the total fee burden is:

Venture capital funds typically exit their investments through:

An investor owns a 'Protective Put'. This position consists of:

Why do private equity funds charge management fees on committed capital rather than invested capital?

A 'Secondary Sale' in the context of private equity means:

The 'Multiple of Invested Capital' (MOIC) is a performance measure defined as: