Based on historical data, Finster can most likely meet Braden's lofty goals by investing in: | | | | D) | nothing, because no asset class meets those requirements. |
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Answer and Explanation
The HFR Distressed Securities index outperforms both stocks and bonds absolutely, with higher Sharpe ratios than either. It is also poorly correlated with the stock market, so it would diversify a stock portfolio. Private equity has historically delivered better returns than stocks, but it is highly correlated with the stock market, and Sharpe ratios can be quite high. Direct investments in real estate generally provide returns lower than those of stocks, though they do provide substantial diversification benefits.
Which of Finster's notes about swaps is least accurate? A) | The value of an interest-rate swap will change over time if market rates change, but will not change over time if market rates stay the same, even if prices change. |
| | B) | The value of a commodity swap will change over time regardless of whether market rates or prices change. |
| | C) | Both interest-rate and commodity swaps have a value of zero initially. |
| | D) | In the event of a change in market rates, the value of both an interest-rate swap and a commodity swap will change. |
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Answer and Explanation
The values of both interest-rate swaps and commodity swaps will change over time regardless of movement (or lack thereof) in market rates or prices. Both types of swaps do indeed have a value of zero at inception, and a change in market rates will affect the value of both types of swaps.
The Madison due diligence for hedge funds is detailed, but not comprehensive. Which traditional aspect of due diligence is neglected? | A) | Review of other funds with similar management styles. |
| | B) | Assessment of the fund's suitability for particular investors. |
| | C) | Consideration of the fund's use of leverage. |
| D) | Analysis of the fund's research expenditures. |
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Answer and Explanation
A review of the fund's competitors is a good idea, but it is not part of due diligence. Neither is an assessment of the fund's suitability for particular investors. Both of those reviews should be part of the investment decision, but due diligence normally means an analysis of how the fund operates, rather than its investment merits relative to outside criteria. The fund's use of leverage would fall under Hollis' expertise as he considers the investment style, financial policies, and risk profile. Madison Partners appears to have this issue well in hand. However, the fund's research strategy and expenditures are key to understanding how the fund operates, and none of Madison's analysts appears to address this topic.
Which of the Madison Partners made the most accurate statement about alternative investments?
Answer and Explanation
Hollis is wrong because the claims of later investors are generally senior to those of investors holding convertible preferred stock. Ignitowski is wrong because agricultural commodities have historically provided lower returns than bonds. Kelso is right about survivorship bias but wrong about style drift. Jacobs' assessment of private-equity limited partnerships is accurate. | 
发表于 2008-9-16 14:49
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