Fit Questions Flashcards
1
Q
What is a hedge fund?
A
Hedge funds are alternative investments that use pooled funds to employ different strategies to earn an active return, or alpha, for their investors.
2
Q
What are alternative assets?
A
- Alternative assets are active investments and not passive investments
- Must manage the tradeoff between the risk with the reward
3
Q
Why BAAM/Blackstone?
A
- The Hedge Fund Solutions group is the undisputed global leader
- Constantly evolving and thinking of new ways to exceed expectations and reach their client’s goals
- I really like the client-centered philosophy
- Custom-tailored strategies for each client
- I really like the client-centered philosophy
- They are trusted by the largest institutional investors
- Really like the connection to pension funds
- Pension funds depend on and trust BAAM to grow their assets
- Preserve the capital that millions of people rely on
- Protecting the financial futures of people around the world
4
Q
Why investing?
A
- Exciting and interesting because it is constantly evolving
- Markets conditions are always changing
- Requires investors to stay on their toes
- To be successful, you need to be creative and have a lot of grit
5
Q
Why invest in alternative assets?
A
- Effective alternative strategies can offer higher expected returns per unit of risk than the traditional long equity and fixed income strategies
- Alternatives can offer additional benefits such as hedging against inflation, interest rate volatility, and market risk
- Low correlation to traditional asset classes
6
Q
What are the alternative investment categories?
A
- Hedge Funds
- generate alpha, or returns, with less volatility than public equity markets
- Private Equity
- receive premiums on illiquidity of investments
- Real Assets
- diversify, generate income, and gives inflation-sensitive exposure
- Real Estate
- Commodities
- Gold
- diversify, generate income, and gives inflation-sensitive exposure
7
Q
What do you know about BAAM?
A
- largest allocator of capital to hedge funds
- $72 billion AUM
- innovation is key to continued success
8
Q
Do you think hedge funds will generate higher or lower returns in the future, and why do you think so?
A
- higher returns because we are on an 8+ year market rally and are bound to experience a recession of some sort
- when recession hits, hedge funds will outperform public equity markets
9
Q
What is a risk-adjusted return?
A
- the return on an investment relative to its risk profile
- finding an investment that has greater returns than the benchmark with less risk
10
Q
What is BAAM’s investor base?
A
11
Q
How are alternative asset managers rewarded?
A
12
Q
Why invest in BAAM?
A
- Expert due diligence
- monitoring of hedge fund portfolios
- cheaper to invest through BAAM than to hire own team to perform due diligence and to monitor hedge funds
- HFs have a high barrier to entry, requiring anywhere in capital from $1 - $50mm
- Investors that want to limit exposure can gain access to these capital markets through AA managers
13
Q
Why not invest in BAAM?
A
- investor desires greater control over portfolio and investments
- Double layer of fees
14
Q
How would you put together a HF portfolio?
A
15
Q
Why does an AA manager invest in multiple HFs?
A
- Can aggregate managers of single strategy type
- Or have a multi-strategy approach, spreading risk across different HF strategies
