2.2

Question 1

Buy Side

Answer 1

Plan Sponsor - 401K / Insurance
Foundation - not for profit
Endowment - Fund bestowed upon individual
Family Office - family that comes together to manage personal investments
Sov. Wealth Funds - state owned investments
LP’s - offers benefit of limited liability
Private Inv. Pools - hedge funds, funds of funds, equity funds etc.
SMA - separately managed account
Master LP - structured as LP and offer owner pro rata claims

Question 2

sell side

Answer 2

large dealer banks - major institutions
brokers - receive commissions for executing trades

front office - deal execution / inv. team
back office - maintainance of accounts / information
middle office - risk management

Question 3

outside service providers

Answer 3

prime brokers - carry out trades
accountants / auditors
attornys
fund admin
hedge fund infras. - platform, software data providers
consultants
depositories + custodians - responsible for holding cash DTC = deposit trust company
banks - commercial banks, investment banks. universal banking can do both

Question 4

limited liability

Answer 4

restriction of potential losses to fixed sum of inveted assets

Question 5

passive investments

Answer 5

positions in entities over which owner does not exert control

Question 6

probity

Answer 6

strong principles such as honesty, decency and integrity

Question 7

Corporation+LLC

Answer 7

corporation shareholders recieve distributions
LLC - offers investors protection from losses, does not require proportionate to each’s capital

LLC = # of investors
GP
Fund of fund of funds

SPV - legal entity that is specified for specific function

Question 8

master feeder funds

Answer 8

designed to provide investors subject to different taxes but want to invest.

master trust legal structure to invest onshore and offshore so both can share manager skills

feeder fund - legal structure with common preferences with regard to tax

Question 9

4 key partnership documents

Answer 9

private placement memoranda
partnership agreement
subscription agreement
management company operating agreement

Question 10

LP

Answer 10

LPA = LP Agreement, legal framework
investor protection clauses and economic terms clauses
LP lays out all conditions to align interest in LP and GP

Question 11

LP advisory committee

Answer 11

LPAC responsibilites defined in LPA dealing with conflicts reviewing valuations etc.
qualified majority is more than 75% of LP in contrast to over 50% required for majority

Question 12

Global Regulations

Answer 12

market in financial instrument = MiFID is eu for investment managers
alternative investment fund managers directive = AIFMD, for alternatives
australian securities and investment commission
SICAV = eu structures openly traded funds

Question 13

Markets

Answer 13

primary - methods, institutions, and mechanisms involved in placement of structures to investors
secondary - trading among investors of previously existing securities
third markets - regional exchanges where stocks listed in primary secondary markets
fourth markets - electronic exchanges that allow traders to quickly buy and sell exchange listed stocks

Question 14

forms of hedge fund regulation

Answer 14

registration, licensing, minimum capital, waiting periods
restrictions on inv advisors and hedge funds managers
marketing channels utilised
leverage, liquidity, risk reporting
on going reporting

Question 15

liquid alternative investments

Answer 15

investment vehicles that offer alternative strategies providing liquidity through opportunities to sell their positions in a market

Question 16

5 types of liquid alternative funds

Answer 16

unconstrained clones 
constrained clones 
liquidity-based replication products 
skill-based replication products 
absolute return diversified products

Question 17

Income tax

Answer 17

includes taxation on individual and corp income. progressive taxation places higher-percentage taxation on individuals and corp with higher income

Question 18

short selling

Answer 18

borrowing securities from a lender selling securities at market and purchasing identical securities in market to extinguish the loan from securities lender