CAIA Practice Questions
What assets are often characterized as traditional by some and alternatives by others in: hedge
funds, private equity, and real assets - ✔✔Hedge Funds: Liquid alternative mutual funds
Private E
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CAIA Practice Questions
What assets are often characterized as traditional by some and alternatives by others in: hedge
funds, private equity, and real assets - ✔✔Hedge Funds: Liquid alternative mutual funds
Private Equity: Closed-end funds with illiquid holdings
Real Assets: Public real estate and public equities of corporations with performance dominated
by stable positions in real assets
4 major methods of analysis that distinguish the analysis of alternative investments from trad.
investments - ✔✔Return Computation Methods, Statistical Methods, Valuation Methods,
Portfolio Management Methods
Define investment - ✔✔Investment is any deferred consumption
4 major types of real assets other than land and other types of real estate - ✔✔Natural Resources,
Commodities, Infrastructure, and IP
4 return characteristics that differentiate trad. and alt investments - ✔✔Diversification,
Illiquidity, Inefficiency, Nonnormality
Define Active Management - ✔✔Refers to efforts of buying and selling securities in pursuit of
superior combos of risk and return
Define an incomplete market - ✔✔Refers to lack of investment opportunities that causes market
participants to be unable to implement an investment strategy that satisfices their exact
preferences such as risk
4 major types of alt investments - ✔✔Real Assets, HF, PE, Structured Products
When did avg quality corp bonds and international equities become commonly viewed as
institutional quality inv. in US? - ✔✔Between 1950-1980
4 major legal documents necessary for establishing and managing a HF - ✔✔Private-Placement
memoranda, partnership agreement, subscription agreement, & management company operating
agreement
What is qualified majority? - ✔✔More than 75% of LPs voting to make a decision
What is Systematic Risk? - ✔✔Risk in the potential for economy wide losses attributable to
failures or concerns over potential failures in markets
3 constraints against achieving alternative investment benefits through liquid products -
✔✔Leverage, Regulatory constrains on concentration, Illiquidity constraints
Difference between a hard hurdle and soft hurdle rate - ✔✔Hard hurdle rate limits incentive fees
to profits in excess of the hurdle rate
Soft hurtle rate allows fund managers to earn an incentive fee on all profits, given the hurdle rate
has been acheived
is IRR a dollar-weighted return or a time-weighted return? - ✔✔IRR is the primary method of
computing dollar-weighted return
What is the primary cause of the shape of the J-curve of
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