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发表于 2012-4-2 13:03
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Patsy Cain works in the alternative investment division for a global investment bank. This morning she received a questionnaire from Michael Garland, a computer-industry executive looking for someone to handle a portion of his investment portfolio. Cain had sent him the questionnaire a week ago in an effort to determine whether he was a good candidate for money management.
When asked about his investment experience, Garland responded that he has been actively investing in a variety of asset classes for more than 30 years, with considerable success overall. Tax issues are a concern, as Garland receives a large amount of dividend income from the company he owns and he also operates several charitable foundations funded by both himself as well as outside donors.
Garland also wrote that he does not like gambling or tobacco companies and can afford to tie up his money for no more than five years because he intends to retire at that time.
After Cain returns the questionnaire, Garland calls for an appointment. When he meets with Cain, he explains that another manager has done a fine job with his stocks and bonds, but he is not happy with the performance of his alternative investments and wants her to manage them. Cain still is not sure what kind of investments would be best for Garland, so she asks him to rank his investment goals in order of importance. They are:- Returns.
- Diversification.
- Ease of tracking.
Garland is very interested in commodities. He owns a chemical company that makes food additives and flavorings, and he uses a lot of corn and other grains in his products. Rather than buy grains at market prices, Garland would like to purchase quantities of grain for his own use, store it in his own warehouse, and sell any excess. Alternatively, he could use futures contracts to guarantee prices for purchases at a future date.
Cain decides that Garland is a likely candidate for commodity investments. When she suggests futures to him, Garland explains that he got burned on a natural-gas investment once and is nervous about commodities because of their price volatility. Cain advises him to stick with oil futures rather than natural-gas futures, offering four reasons for the advice:- "Oil prices are similar worldwide, while natural-gas prices differ by region."
- "Seasonal trends in oil prices are well documented."
- "Forward prices for oil tend to be less volatile than prices for natural gas."
- "Oil is easier to transport than natural gas."
Garland is also interested in hedge funds, though he is concerned about their potential volatility. Cain makes a mental note to assemble a list of hedge funds with high Sharpe ratios. Hedge funds appeal to Garland mostly because of their willingness to take both long and short positions. He postulates that a hedge fund that takes only long positions might as well be a mutual fund. Which of the following statements about oil and natural-gas futures is least accurate? A)
| "Forward prices for oil tend to be less volatile than prices for natural gas." |
| B)
| "Oil prices are similar worldwide, while natural-gas prices differ by region." |
| C)
| "Seasonal trends in oil prices are well documented." |
|
Oil prices do not follow seasonal trends, though natural-gas prices do. Both remaining statements are true. (Study Session 13, LOS 33.a)
Based only on Garland's three stated investment goals, his best option is: A)
| publicly traded real-estate equity units. |
| | C)
| a market-neutral hedge fund. |
|
Real estate, private equity, and hedge funds can all boost returns, though commodities are more often used as a diversification tool. Real estate and hedge funds offer substantial diversification benefits, but private equity investments tend to move with the stock market. Hedge fund performance is difficult to track, but the changing value of a publicly traded real-estate fund is easy to track. While real estate investments are not the best return generators, they have performed well in recent years, and they are very good for diversification. As such, the real estate equity units represent the best option. (Study Session 13, LOS 31.d)
In selecting hedge funds for Garland, Cain should avoid: | B)
| emerging-market funds. |
| C)
| merger-arbitrage funds. |
|
Most emerging markets do not permit short positions, and Garland only wants hedge funds that take short positions. Both remaining fund strategies generally involve long-short combinations. (Study Session 13, LOS 31.p)
With regard to measuring the volatility of hedge funds, which of the following is least likely to be a limitation of the Sharpe ratio? A)
| funds with large private-equity positions will appear less volatile than they actually are. |
| B)
| its time-dependency makes volatility appear higher over long periods. |
| C)
| it is not effective for selecting good hedge-fund investments. |
|
The Sharpe ratio is time-dependent, but the ratio rises when calculated using longer time periods, suggesting that volatility appears lower, not higher. Both remaining statements reflect limitations of the Sharpe ratio. (Study Session 13, LOS 31.s)
Based on Garland's response to the questionnaire, the issue most likely to cause Cain NOT to take him on as a client is:
Garland's responses suggest he is sophisticated and wealthy, quite suitable for alternative-asset investments. His private-equity ownership and complex tax situation are issues Cain must address, but they are not uncommon, and certainly no reason not to take him on as a client. That leaves decision risk. Garland's answers gave no hint about whether he is loss-averse or likely to make quick and emotional decisions. Since both remaining answers are not reasons for concern, the biggest worry must be the information he did not provide relating to decision risk. (Study Session 13, LOS 31.c)
Regarding Garland's plan to purchase grain for his company's use, Cain should begin by advising him about:
Garland is interested in selling the excess grain, not lending it, so lease rates are not relevant. Storage costs may be an issue, though in some cases the company could have no measurable storage costs. However, the company is likely to know its own costs, and there is probably little reason for Cain to advise Garland on this topic. The convenience yield reflects the value of a commodity held by an investor for nonmonetary return, and affects the price an investor should pay for a commodity. (Study Session 13, LOS 33.a) |
|
is equal to the risk-free rate less the lease rate. The lease rate, 
, is income earned if the commodity is loaned out. Thus, an increase in lease rate, 
