[2008]Topic 76: Hedge Funds: Past, Present, and Future 相关习题 bets, guidelines, making, mutual

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AIM 2: Compare hedge funds with mutual funds.

1、Hedge funds operating in the United States that abide by certain guidelines:

A) gain exemption from most SEC regulations. 

B) may advertise to “accredited” investors.

C) can utilize certain hedging strategies. 

D) avoid restrictions on making macroeconomic bets.

wanganjie

 

The correct answer is A

Hedge funds may not engage in advertising of any kind. Hedge funds may or may not utilize hedging strategies. Hedge funds may make macroeconomic bets, but this is not because of their agreement to adhere to certain guidelines. The main reason for hedge funds to organize under section 3 (c) (1) is to gain exemption from most SEC regulations.

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2、Which of the following statements regarding the difference between hedge funds and mutual funds is TRUE?

A) Hedge funds have fewer restrictions on short selling securities compared to mutual funds.

B) While anyone can invest in mutual funds, qualified hedge fund investors must have a net worth of $1 million.

C) Unlike hedge funds, mutual funds are unable to use leverage.

D) Mutual funds tend to hold fewer securities than hedge funds.

wanganjie

 

The correct answer is A

Hedge funds have no constraints on short selling. The other statements are all incorrect. Hedge fund portfolios are more concentrated, which implies that they tend to hold fewer securities. Mutual funds are able to use leverage, but the application of leverage is limited. Qualified hedge fund investors must have a net worth of $5 million.

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3、Which of the following statements concerning comparisons between hedge funds and mutual funds is most accurate?

A) Hedge funds tend to spread their holdings across more securities than mutual funds.

B) Mutual funds tend to invest according to a specific investment approach while hedge funds do not.

C) Mutual funds are restricted from using any leverage in their portfolios, while hedge funds use leverage extensively.

D) Hedge funds cannot advertise in order to solicit new funds, while mutual funds can make advertisements to the general public.

wanganjie

 

The correct answer is D

Hedge funds are private investment vehicles for qualified investors. Being private allows the hedge fund to escape regulatory oversight, but means the hedge fund cannot advertise to attract new funds. In contrast, mutual funds can advertise to the general public. Note that the other statements are false. Hedge fund portfolios tend to be more concentrated than mutual funds, both hedge funds and mutual funds tend to invest according to a specific approach, and both hedge funds and mutual funds are permitted to use leverage, although mutual funds are typically limited in the amount of leverage they can use (i.e., up to 33% of net assets).

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AIM 3: Analyze the implications the incentive structure of hedge funds have on the risk and performance of the funds.

1、Which of the following statements is true concerning the compensation paid to a fund manager? A fee based upon:

A) profits is asymmetric and is the usual fee structure for hedge funds. 

B) profits earned is symmetric and is the usual fee structure for hedge funds. 

C) assets under management is asymmetric and the usual fee structure for hedge funds. 

D) assets under management is asymmetric and is the usual fee structure for mutual funds. 

wanganjie

 

The correct answer is A

This is the only true statement. Fees based upon profits are asymmetric and are usually the fee structure for hedge funds.

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2、Managers of hedge funds are typically compensated by:

A) a base management fee, based on the value of assets under management, plus an incentive fee, based on profits. 

B) a management fee, based on the net change in value of the assets during the year.  

C) an incentive fee, based upon some performance goal set at the beginning of the fiscal year.

D) an incentive fee, paid only if performance exceeds a “high water mark”. 

wanganjie

 

The correct answer is A

Typical arrangements pay the manager a base fee, usually around 1% of assets, plus an incentive fee proportional to profits.