Portfolio Management 6 - Alternative Investment Categories

Question 1

What are the categories of Alternative Investments?

Answer 1

1) Hedge funds
2) Private equity funds
3) Real estate
4) Commodities
5) Infrastructure
6) Tangible and Intangible Assets

Question 2

What is a private investment vehicle that manage portfolios of securities and derivative positions using a variety of strategies (including taking long and short positions, and
significant leverage)?

Answer 2

Hedge Funds

Question 3

What is the aim of return in Hedge Funds?

Answer 3

To achieve positive absolute returns irrespective of the performance of the broad market

Question 4

What is a pooled investment vehicle where the adviser pools together the money invested in the fund by all the investors and uses that money to make investments on behalf of the fund?

Answer 4

Private Equity Fund

Question 5

What types of companies can Private Equity Funds be invested in?

Answer 5

1) non-traded companies (start-ups or established companies)

2) public companies with the intent of making them private

Question 6

What types of funds are included in Private Equity Funds?

Answer 6

1) Leveraged buyout (LBO) fund

2) Venture capital (VC) funds

Question 7

Which fund borrows money to finance the acquisition of
a company that focuses on acquiring established, profitable, cash-generating companies
with solid customer bases and proven products?

Answer 7

Leveraged buyout (LBO) fund

Question 8

Which fund specializes in providing financing to start-ups or
young companies with high growth potential?

Answer 8

Venture capital (VC) funds

Question 9

What are investments that include investments in buildings and/or land, either directly
or indirectly?

Answer 9

Real Estate

Question 10

What are the types of real estate investments?

Answer 10

1) Private commercial real estate equity (e.g., ownership of an office building).

2) Private commercial real estate debt (e.g., directly issued loans or mortgages on commercial property).

3) Public real estate equity (e.g., real estate investment trusts [REITs]).

4) Public commercial real estate debt (e.g., commercial mortgage-backed securities).

Question 11

What are commodities?

Answer 11

A basic good used in commerce that is interchangeable with other goods of the same type (e.g. oil, gold, metal, etc)

Question 12

How can investors invest in commodities?

Answer 12

1) Investors can directly invest in physical commodity products

or

2) Invest in
businesses engaged in the production of physical commodities

Question 13

How can investors gain exposure to commodities?

Answer 13

through commodity futures contracts and funds benchmarked to commodity indexes

Question 14

________ assets are real, capital-intensive, long-lived assets that are
intended for public use and provide essential services (e.g., roads, dams, and schools)

Answer 14

Infrastructure

Question 15

Most investment in infrastructure occurs _____ through shares in infrastructure companies, private equity funds, listed funds, and
unlisted mutual funds that invest in infrastructure.

(directly or indirectly)

Answer 15

indirectly

Question 16

What is a tangible asset?

Answer 16

physical assets that can be seen touched or felt with an exchange value

Question 17

Examples of tangible assets:

Answer 17

art, antique furniture, stamps, etc.

Question 18

What is an intangible asset?

Answer 18

non-monetary asset that cannot be seen or touched

Question 19

Examples of intangible assets:

Answer 19

patents

Question 20

What is absolute return?

Answer 20

the return that an asset achieves over a specified period

Question 21

he Halen Endowment Fund (HEF) currently has zero allocation to alternative investments and wants
exposure to grains and infrastructure. HEF is most likely to invest in:

A. REITs and mortgage-backed securities.
B. Hedge funds and leveraged buyout funds.
C. Commodity futures contracts and private equity.

Answer 21

C