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Questions and Answers
What is the primary characteristic of systematic risk?
What is the primary characteristic of systematic risk?
Which of the following best describes first-order risk?
Which of the following best describes first-order risk?
Which second-order risk involves the difficulty in selling a security without significantly affecting its price?
Which second-order risk involves the difficulty in selling a security without significantly affecting its price?
How does higher leverage impact an investment?
How does higher leverage impact an investment?
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Which of the following is NOT classified as a second-order risk?
Which of the following is NOT classified as a second-order risk?
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What does deal breakage risk involve?
What does deal breakage risk involve?
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Which risk is associated with the likelihood that a debt issuer will not fulfill payment obligations?
Which risk is associated with the likelihood that a debt issuer will not fulfill payment obligations?
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What type of funds specialize in taking positions based on expected company mergers?
What type of funds specialize in taking positions based on expected company mergers?
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Which risk is primarily tied to the possibility of a counterparty not meeting its obligations in over-the-counter transactions?
Which risk is primarily tied to the possibility of a counterparty not meeting its obligations in over-the-counter transactions?
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What does trading risk specifically refer to in financial transactions?
What does trading risk specifically refer to in financial transactions?
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What is a significant operational risk faced by alternative strategy funds?
What is a significant operational risk faced by alternative strategy funds?
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Which of the following is NOT a characteristic of hedge funds?
Which of the following is NOT a characteristic of hedge funds?
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What distinguishes hedge funds from other managed products in terms of investment strategy selection?
What distinguishes hedge funds from other managed products in terms of investment strategy selection?
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What is the common structural characteristic of hedge funds?
What is the common structural characteristic of hedge funds?
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For Canadian investors, what distinguishes liquid alternatives from traditional hedge funds?
For Canadian investors, what distinguishes liquid alternatives from traditional hedge funds?
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Which type of investment vehicle is primarily used for institutional and high-net-worth investors?
Which type of investment vehicle is primarily used for institutional and high-net-worth investors?
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What is the minimum investment amount set by National Instrument 45-106 for non-individual investors wishing to bypass the prospectus requirement?
What is the minimum investment amount set by National Instrument 45-106 for non-individual investors wishing to bypass the prospectus requirement?
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Which of the following statements regarding accredited investor qualifications is accurate?
Which of the following statements regarding accredited investor qualifications is accurate?
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What exemption allows for the sale of securities without a prospectus to investors based on providing an offering memorandum?
What exemption allows for the sale of securities without a prospectus to investors based on providing an offering memorandum?
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Which of the following best describes an accredited investor in the context of institutional qualifications?
Which of the following best describes an accredited investor in the context of institutional qualifications?
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Study Notes
Alternative Investments: Benefits, Risks, and Structure
- Alternative investments include hedge funds and alternative mutual funds
- They differ from conventional mutual funds in their structure, benefits, and risks
- Learning objectives include explaining what an alternative investment is, identifying main categories, discussing benefits, describing risks, detailing structural features, and comparing them with conventional mutual funds
Learning Objectives
- Explain what an alternative investment is.
- Identify the main categories and sub-categories of alternative investments.
- Discuss the benefits of adding alternative investments to a portfolio.
- Describe the risks of investing in alternative investments.
- Detail the structural features of hedge funds, alternative mutual funds, funds of hedge funds and ETFs.
- Detail the similarities and differences between alternative mutual funds, hedge funds, and conventional mutual funds.
Content Areas
- Introduction to Alternative Investments
- Investing in Alternatives—Benefits and Risks
- Alternative Investment Structures
- Comparing Alternative Mutual Funds with Conventional Mutual Funds and Hedge Funds
Key Terms
- Accredited investor
- Accredited investor exemption
- Alternative investment
- Alternative assets
- Alternative mutual fund
- Drawdown
- Efficient frontier
- First-order risk
- Fund of hedge funds
- Hedge fund
- High-water mark
- Hurdle rate
- Minimum investment exemption
- Offering memorandum
- Offering memorandum exemption
- Operational risk
- Product transparency
- Second-order risk
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Description
This quiz explores alternative investments, focusing on hedge funds and alternative mutual funds. You will learn about their benefits, risks, and structural features as well as how they compare to conventional mutual funds. Test your understanding of the various categories of alternative investments and their roles in portfolio management.
