CAIA - CIT 1 - Guide to Hedge Fund Business and Operational Due Diligence Flashcards
In addition to investment related risks, investors are exposed to ___ and ___risks.
In addition to investment related risks, investors are exposed to business and operational risks.
The most common non-investment risk is ___risk from ___or ___.
The most common non-investment risk is operational risk from fraud or misvaluation.
___ ___refers to capital with more favorable liquidity terms.
Preferential liquidity refers to capital with more favorable liquidity terms.
Some onshore and offshore funds invest separately and are set up as a ___-by-___structure.
Some onshore and offshore funds invest separately and are set up as a side-by-side structure.
Inadequate ___ ___can result in fraud.
Inadequate cash controls can result in fraud.
Subscription/redemption accounts should be under an ___ control.
Subscription/redemption accounts should be under an administrator’s control.
To wire cash from the master fund account, the best practice is for electronic sign-offs by ___ authorized employees.
To wire cash from the master fund account, the best practice is for electronic sign-offs by 2 authorized employees.
The portfolio manager should have ___ participation in the valuation process.
The portfolio manager should have little participation in the valuation process.
___ ___ typically clear and safe-keep a hedge fund’s cash and securities, ___typically clear and hold cash to support futures positions, and non-prime broker ___hold cash and/or securities from the prime brokers to reduce counterparty risk and eliminate re-hypothecation risk.
Prime brokers typically clear and safe-keep a hedge fund’s cash and securities, FCMs typically clear and hold cash to support futures positions, and non-prime broker custodians hold cash and/or securities from the prime brokers to reduce counterparty risk and eliminate re-hypothecation risk.
___ risk is the risk of broker-dealers using assets posted as collateral by clients as collateral for their own borrowing.
Re-hypothecation risk is the risk of broker-dealers using assets posted as collateral by clients as collateral for their own borrowing.
An ___ report reports on an administrator’s internal controls and is written by a third-party audit firm.
An SSAE 16 report reports on an administrator’s internal controls and is written by a third-party audit firm.
