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Alternative Investments - Alternative Investments Section 2 Online Exam Quiz

Important questions about Alternative Investments - Alternative Investments Section 2. Alternative Investments - Alternative Investments Section 2 MCQ questions with answers. Alternative Investments - Alternative Investments Section 2 exam questions and answers for students and interviews.

1. BMB Capital is a hedge fund with a portfolio valued at $500,000,000 at the beginning of the year. One year later, the value of assets under management is $555,500,000. The hedge fund charges a 2% management fee based on the end-of-year portfolio value as well as a 15% incentive fee. If the incentive fee and management fee are calculated independently, the effective return for a hedge fund investor is closest to:

Options

A : 7.21%.

B : 7.55%.

C : 11.1%.

D :

3. The following information is available about a hedge fund:

Options

A : 11.20%.

B : 11.43%.

C : 13.00%.

D :

5. A hedge fund with an initial value of $200 million has a management fee of 2% and an incentive fee of 20%. Management and incentive fees are calculated independently using end-of-period valuation. The value must reach the previous high water mark before incentive fees are paid. The table below provides end-of-period fund values over the next three years.

Options

A : $8.56 million.

B : $9.56 million.

C : $11.00 million.

D :

46. The return on commodity index is different from the returns on the underlying commodities. This difference is most likely because:

Options

A : the survivorship bias exists in the data.

B : of the mark to market feature on the assets.

C : the index is constructed using commodity futures.

D :

47. Which of the following is most likely a reason for concentrated portfolio strategies to be attractive?

Options

A : They exhibit low risk.

B : They have the potential to generate apha.

C : They have the ability to track market indices.

D :

48. Which of the following is most likely a reason for investing in venture capital?

Options

A : It has a short horizon.

B : It invests in later stage and more established companies.

C : It gives higher returns than the publicly traded equity market.

D :

49. Patrick has positions in multiple long-short equity hedge funds and is worried about whether these positions are sufficiently diversified. He will most likely be concerned about the lack of:

Options

A : transparency in reported positions.

B : frequent independent valuations.

C : liquidity in underlying assets.

D :

50. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. In the second year, the fund value declines to $225 million. In the third year, the fund value increases to $250 million. If the incentive fee is calculated based on the return net of the management fee, and also includes the use of a high watermark, the geometric mean annual return over the three-year period is closest to:

Options

A : 6.14%.

B : 6.31%.

C : 6.44%.

D :

6. The management fee of a hedge fund that has not yet invested all of its committed capital is most likely based on:

Options

A : invested capital.

B : remaining capital.

C : committed capital.

D :

7. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. If the incentive and management fees are calculated independently, the fees earned by SHM is closest to:

Options

A : $7.680 million.

B : $14.928 million.

C : $16.080 million.

D :

8. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. What is an investor’s effective return if the incentive and management fees are calculated independently?

Options

A : 18.46%.

B : 19.96%.

C : 20.54%.

D :

9. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. If the incentive fee is calculated based on return net of the management fee, the fees earned by SHM is closest to:

Options

A : $7.68 million.

B : $14.93 million.

C : $16.08 million.

D :

10. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. What is an investor’s effective return if the incentive fee is calculated based on return net of the management fee?

Options

A : 18.46%.

B : 19.96%.

C : 20.54%.

D :

11. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. If the fee structure specifies a hurdle rate of 8% percent and the incentive fee is based on returns in excess of the hurdle rate, what are the fees earned by SHM assuming the performance fee is calculated net of the management fee?

Options

A : $12.528 million.

B : $13.680 million.

C : $14.928 million.

D :

12. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. If the fee structure specifies a hurdle rate of 8% percent and the incentive fee is based on returns in excess of the hurdle rate, what is an investor’s net return?

Options

A : 20.54%.

B : 21.16%.

C : 21.74%.

D :

13. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. If the fee structure specifies a hurdle rate of 8% percent and the incentive fee is based on returns in excess of the hurdle rate, what are the fees earned by SHM assuming the incentive and management fees are calculated independently?

Options

A : $12.52 million

B : $13.68 million.

C : $14.92 million.

D :

14. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. If the fee structure specifies a hurdle rate of 8% percent and the incentive fee is based on returns in excess of the hurdle rate, what is an investor’s net return assuming the incentive and management fees are calculated independently?

Options

A : 20.54%.

B : 21.16%.

C : 22.74%.

D :

15. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. In the second year, the fund value declines to $225 million. In the third year, the fund value increases to $250 million. If the incentive and management fees are calculated independently, the fees earned by SHM in the second year is closest to:

Options

A : $2.10 million.

B : $4.65 million.

C : $6.75 million.

D :

16. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. In the second year, the fund value declines to $225 million. In the third year, the fund value increases to $250 million. If the incentive and management fees are calculated independently, an investor’s net return for the second year is closest to:

Options

A : 9.03%.

B : -9.03%.

C : -9.47%.

D :

17. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. In the second year, the fund value declines to $225 million. In the third year, the fund value increases to $250 million. If the incentive and management fees are calculated independently and also includes the use of a high water mark, the fees earned by SHM in the third year is closest to:

Options

A : $6.75 million.

B : $8.838 million.

C : $9.012 million.

D :

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