Chapter 20 Alternative Investments: Benefits, Risks, and Structure KT Flashcards
A document, prepared by the dealer, for a new issue outlining some of the salient features of a new hedge fund issue, but not the price or other issue-specific details.
offering memorandum
A fund whose portfolio consists only of a variety of hedge funds.
fund of hedge funds
A type of mutual fund (also known as liquid alternatives) permitted more use of derivatives, leverage, short selling and investments in illiquid assets than conventional mutual funds, but less than hedge funds.
alternative mutual fund
The level of ongoing information regarding investment products, evaluated on level of details provided, frequency of communication and time between fund reporting date and date of communication to investors.
product transparency
The curve that reflects the most efficient portfolios for all levels of risk.
efficient frontier
An individual or institutional investor who meets certain minimum requirement relating to income, net worth, or investment knowledge.
accredited investor
A measure that ensures that a hedge fund manager is paid incentive fees only on net new profits.
high-water mark
A type of risk that refers to the exposure to changes in the general direction of equity, fixed income, currency, and commodity markets.
first-order risk
An investor exemption from receiving a prospectus based on a prescribed minimum investment.
minimum investment exemption
A type of risk related to aspects of trading, which might include liquidity, leverage, deal breakage, concentration, and trading model risks.
second-order risk
The rate that a hedge fund must earn before its manager is paid an incentive fee.
hurdle rate
The risk related to the alternative strategy fund as a business entity.
operational risk
