Introduction to Alternative Investments

Question 1

________ occurs when a new fund enters

a database and historical returns of that fund are added.

Answer 1

backfill bias

Question 2

Many alternative investments, such as hedge and private equity funds, use
partnership structure with a ___________ that manages the business and _____________
who own fractional interests in the partnership.

Answer 2

general partner, limited partners (investors)

Question 3

Hedge funds are typically classified by strategy. One such classification includes
four broad categories of strategies: _____________.

Answer 3

event driven, relative value, macro, and equity hedge.

Question 4

a _______ provision that requires the GP to return any funds distributed as incentive fees until the LPs have received back their initial investment and 80% of the total profit.

Answer 4

clawback

Question 5

In the hedge fund industry, a ________ is a reduction in net asset value (NAV)
to below the high- water mark.

Answer 5

drawdown

Question 6

A ________ reflects the highest cumulative return used to calculate an incentive fee. In other words, it is the highest value, net of fees, of the fund investment by the individual LP.

Answer 6

high-water mark