Alternative Investment Strategies: Relative Value, Event-Driven, Directional

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Which alternative investment strategy involves long and short equity positions of approximately the same size to generate returns that do not depend on the direction of the stock market?

Credit spread arbitrage

Equity market neutral (correct)

Fixed-income arbitrage

Convertible arbitrage

What is the primary purpose of convertible arbitrage as an alternative investment strategy?

To profit from unique corporate events

To bet on anticipated movements in market prices

To exploit price anomalies between related interest rate securities

To exploit mispricing between convertible securities and the underlying stock (correct)

What is the characteristic feature of fixed-income arbitrage as an alternative investment strategy?

High leverage, typically 10 to 30 times the capital employed (correct)

Profiting from unique corporate events

Generating returns independent of the stock market's direction

Exploiting mispricing between convertible securities and the underlying stock

Which alternative investment strategy profits from price anomalies between related interest rate securities?

Fixed-income arbitrage Signup and view all the answers

In alternative investment strategies, which approach involves exploiting inefficiencies or differences in the pricing of related securities?

Relative value strategies Signup and view all the answers

What is the purpose of event-driven strategies in alternative investments?

To profit from unique corporate events Signup and view all the answers

In yield spread arbitrage, what actions would a manager take if the credit spread is wider than usual?

Buy the risky bond and sell the sovereign bond Signup and view all the answers

What is the primary focus of a merger strategy (risk arbitrage strategy) in event-driven strategies?

Taking a long position in the company being acquired Signup and view all the answers

What distinguishes high-yield bond strategy from other strategies?

Investing in below investment-grade bonds with potentially higher returns Signup and view all the answers

What does a distressed securities strategy primarily invest in?

Equity or debt securities facing bankruptcy or reorganization Signup and view all the answers

What is the main characteristic of global macro funds?

Making bets on major events affecting entire economies Signup and view all the answers

What distinguishes dedicated short bias from a dedicated short strategy?

Dedicated short bias requires always being net short, unlike a dedicated short strategy Signup and view all the answers

What type of securities do managed futures strategies refer to?

Futures contracts that are actively managed Signup and view all the answers

How do managers typically rank emerging market countries for emerging markets alternative funds?

Based on multiple factors including GDP growth rate, political stability, and financial market regulation Signup and view all the answers

What does a long/short equity strategy involve?

Taking both long and short positions depending on the outlook of specific securities Signup and view all the answers

What does an emerging markets alternative fund primarily invest in?

Equity and debt securities of companies in emerging markets Signup and view all the answers

In yield spread arbitrage, what actions would a manager take if the credit spread is narrower than usual?

Sell the risky bond and buy the sovereign bond Signup and view all the answers

What distinguishes a high-yield bond strategy from other strategies?

Invests in below investment-grade bonds Signup and view all the answers

What is the primary focus of a merger strategy (risk arbitrage strategy) in event-driven strategies?

Simultaneously investing in long and short positions of companies involved in a proposed merger or acquisition Signup and view all the answers

What type of securities do managed futures strategies refer to?

Futures contracts that are actively managed Signup and view all the answers

What does a long/short equity strategy involve?

Taking both long and short positions, depending on the outlook of specific securities Signup and view all the answers

What does a distressed securities strategy primarily invest in?

Equity or debt securities facing bankruptcy or reorganization Signup and view all the answers

What is the main characteristic of global macro funds?

Betting on major events affecting entire economies Signup and view all the answers

What is the purpose of event-driven strategies in alternative investments?

To exploit inefficiencies or differences in the pricing of related securities Signup and view all the answers

Which alternative investment strategy involves long and short equity positions of approximately the same size to generate returns that do not depend on the direction of the stock market?

Long/short equity Signup and view all the answers

Which alternative investment strategy profits from price anomalies between related interest rate securities?

Fixed-income arbitrage Signup and view all the answers

What national instrument regulates ETFs when they are structured as commodity pools?

NI 81 – 104 Signup and view all the answers

What type of document must ETFs produce and file, and is distributed through the dealer where the ETF is purchased?

ETF facts Signup and view all the answers

When an ETF provider wants to launch a new ETF, how are ETFs created or redeemed?

In blocks of units known as a prescribed number of units Signup and view all the answers

What do designated brokers give in exchange for the basket of shares when creating or redeeming ETFs?

Prescribed number of units Signup and view all the answers

Why are ETFs relatively cheap in terms of Management Expense Ratios (MERs) compared to mutual funds?

Designated brokers pay trading costs and fees for the underlying securities Signup and view all the answers

Where are dealers required to make the prospectus available to investors?

Upon request from investors Signup and view all the answers

What is the primary benefit of exchange-traded funds (ETFs) compared to other managed products and mutual funds?

Lower MERs and higher tradability and liquidity Signup and view all the answers

What is a characteristic feature of synthetic exchange-traded funds?

Higher counterparty risk Signup and view all the answers

What distinguishes leveraged exchange-traded funds (ETFs) from standard ETFs?

Ability to make leveraged returns while taking on leveraged risk Signup and view all the answers

Which type of exchange-traded fund (ETF) primarily invests in companies associated with a commodity?

Equity-based commodity ETF Signup and view all the answers

What is the main focus of covered call exchange-traded funds (ETFs)?

Execution of covered call strategies for investors Signup and view all the answers

What is the main difference between active-exchanged traded funds and standard (index-based) ETFs?

Active management at the end of the day or week Signup and view all the answers

In what way does an inverse exchange-traded fund (ETF) differ from other ETFs?

It shows a gain when the index falls and a loss when the index goes up Signup and view all the answers

What type of exchange-traded fund involves constructing a portfolio to achieve a specific objective without following an index?

Rules-based exchange traded fund Signup and view all the answers

What is the primary drawback of synthetic exchange-traded funds?

Greater reliance on derivative products Signup and view all the answers

Which type of exchange-traded fund enables investors to buy and sell throughout the day, trade on margin, short-sell, and trade options?

Standard (index-based) ETF Signup and view all the answers

Alternative Investment Strategies: Relative Value, Event-Driven, Directional

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Questions and Answers

Which alternative investment strategy involves long and short equity positions of approximately the same size to generate returns that do not depend on the direction of the stock market?

What is the primary purpose of convertible arbitrage as an alternative investment strategy?

What is the characteristic feature of fixed-income arbitrage as an alternative investment strategy?

Which alternative investment strategy profits from price anomalies between related interest rate securities?

In alternative investment strategies, which approach involves exploiting inefficiencies or differences in the pricing of related securities?

What is the purpose of event-driven strategies in alternative investments?

In yield spread arbitrage, what actions would a manager take if the credit spread is wider than usual?

What is the primary focus of a merger strategy (risk arbitrage strategy) in event-driven strategies?

What distinguishes high-yield bond strategy from other strategies?

What does a distressed securities strategy primarily invest in?

What is the main characteristic of global macro funds?

What distinguishes dedicated short bias from a dedicated short strategy?

What type of securities do managed futures strategies refer to?

How do managers typically rank emerging market countries for emerging markets alternative funds?

What does a long/short equity strategy involve?

What does an emerging markets alternative fund primarily invest in?

In yield spread arbitrage, what actions would a manager take if the credit spread is narrower than usual?

What distinguishes a high-yield bond strategy from other strategies?

What is the primary focus of a merger strategy (risk arbitrage strategy) in event-driven strategies?

What type of securities do managed futures strategies refer to?

What does a long/short equity strategy involve?

What does a distressed securities strategy primarily invest in?

What is the main characteristic of global macro funds?

What is the purpose of event-driven strategies in alternative investments?

Which alternative investment strategy involves long and short equity positions of approximately the same size to generate returns that do not depend on the direction of the stock market?

Which alternative investment strategy profits from price anomalies between related interest rate securities?

What national instrument regulates ETFs when they are structured as commodity pools?

What type of document must ETFs produce and file, and is distributed through the dealer where the ETF is purchased?

When an ETF provider wants to launch a new ETF, how are ETFs created or redeemed?

What do designated brokers give in exchange for the basket of shares when creating or redeeming ETFs?

Why are ETFs relatively cheap in terms of Management Expense Ratios (MERs) compared to mutual funds?

Where are dealers required to make the prospectus available to investors?

What is the primary benefit of exchange-traded funds (ETFs) compared to other managed products and mutual funds?

What is a characteristic feature of synthetic exchange-traded funds?

What distinguishes leveraged exchange-traded funds (ETFs) from standard ETFs?

Which type of exchange-traded fund (ETF) primarily invests in companies associated with a commodity?

What is the main focus of covered call exchange-traded funds (ETFs)?

What is the main difference between active-exchanged traded funds and standard (index-based) ETFs?

In what way does an inverse exchange-traded fund (ETF) differ from other ETFs?

What type of exchange-traded fund involves constructing a portfolio to achieve a specific objective without following an index?

What is the primary drawback of synthetic exchange-traded funds?

Which type of exchange-traded fund enables investors to buy and sell throughout the day, trade on margin, short-sell, and trade options?

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