Alternative Investments【 Reading 31】习题精选 assets, respect, 2012

prashantsahni

With respect to the role of alternative assets in a portfolio, it can be best described as exposure to:

A) special investment strategies.

B) unique asset classes and/or special investment strategies.

C) unique asset classes only.

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We can categorize alternative investments into three categories corresponding to the role they play in the portfolio.

• Exposure to asset classes that stocks and bonds cannot provide.
• Exposure to special investment strategies such as those used by hedge funds.
• Investments that use both special strategies and unique asset classes (e.g., funds that invest in private equity and distressed securities).

prashantsahni

Special due diligence issues such as valuation, credit analysis, and financial structure are most likely associated with investments:

A) in managed futures.

B) in distressed securities.

C) made indirectly in real estate.

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Distressed securities investing requires due diligence with respect to business valuation, credit analysis, and assessing the company’s problems and financial structure.

kim226

The structure, explanation of performance data, and style and strategy are special due diligence issues most associated with:

A) hedge funds.

B) direct real estate investing.

C) distressed securities.

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Due diligence in hedge funds should include an inquiry into the following list: the structure of the hedge fund, the strategy and style of the hedge fund, performance data since inception with explanations, risk measures, research, administration, and legal issues.

kim226

With respect to information efficiency and potential for diversification, in comparing alternative investments to exchange traded stocks, the markets for alternative investments are:

A) less informationally efficient and provide more opportunity for diversification.

B) less informationally efficient and provide less opportunity for diversification.

C) more informationally efficient and provide more opportunity for diversification.

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Alternative investments can provide exposure to unique risks and trading strategies and thus provide good diversification to a stock and bond portfolio. The markets for alternative investments are informationally less efficient than most stock markets.

kim226

With respect to due diligence costs and liquidity, in comparing alternative investments to exchange traded stocks, the markets for alternative investments have:

A) less liquidity and higher due diligence costs.

B) less liquidity and lower due diligence costs.

C) more liquidity and higher due diligence costs.

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The common features are: low liquidity, provide good diversification, due diligence costs are high, difficult appraisals, and the markets for alternative investments are informationally less efficient than most stock markets.

kim226

Which of the following is least likely to be a due diligence checkpoint in the selection process of active managers of alternative investments?

A) The geographic location of the office with respect to the geographic locations in which the manager invests.

B) The service providers like lawyers and ancillary staff working for the manager’s firm.

C) Market opportunity the manager seeks to exploit.

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The due diligence checkpoint list does not mention the geographic location of the offices.

kim226

In the due diligence process of selecting an active manager of alternative investments, “assessing the investment process” means assessing the:

A) stability of the organization and employee turnover.

B) competitive edge the manager offers.

C) special assets the manager offers.

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In the due diligence checkpoints, “assessing the investment process” means assessing the competitive edge the manager offers. The special assets are associated with the “market opportunity” checkpoint. The stability of the organization and employee turnover is associated with the “organization” checkpoint.

kim226

In the due diligence process of selecting an active manager of alternative investments, “assessing the organization of the manager’s firm” means assessing the:

A) terms and structure of the investments the manager offers.

B) stability of the firm and staff turnover.

C) documents (e.g., prospectuses of the investments the manager offers).

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Assessing the organization of the manager and his/her operations means assessing whether it is stable and well run. This would also mean measuring the staff turnover.

kim226

In the special issues that alternative investments raise for investment advisors of private wealth clients, “decision risk” is associated with:

A) changing a strategy at the time the portfolio has incurred a large loss.

B) making hiring and firing decisions and general employee turnover of the investment firm.

C) assessing the investment opportunity.

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Decision risk is the risk of irrationally changing a strategy.

kim226

In the special issues that alternative investments raise for investment advisors of private wealth clients, with respect to tax issues and suitability:

A) suitability is a special issue to consider but tax issues are not.

B) tax issues are a special issue to consider but suitability is not.

C) both are explicitly special issues to consider.

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Special issues that advisors for private-wealth clients should address are tax issues, determining suitability, communicating with the client, decision risk, and determining if they have a large position in a closely-held company.