Volume 4 Flashcards
What are the 7 common characteristics of hedge funds?
Describe the common different hedge fund classifications?
Describe the risk and liquidity characteristics of the long/short equity approach?
What type of research is most common?
What is the approach to leverage?
What is the strategy to achieve return?
Describe the risk, liquidity and leverage for the dedicated short bias approach?
What is usual type of research, what type of stocks do they usually look for?
Describe the risk, liquidity and leverage for the equity market neutral approach?
What is the expected beta?
what type of trades might be used?
When is the strategy most effective?
Compare the leverage, voltility, beta, return correlation, orientation, value approach and position sizing across dedicated short, short bias, market neutral, L/S and long only?
What is the alpha, return and risk for L/S?
What is the alpha, return and risk for DS/SB and Market neutral?
Describe the risk, liquidity and leverage for merger arb?
What are soft and hard catalyst approaches?
Alpha is usually what?
Trades are typically done using?
Describe the risk, liquidity and leverage for distressed securities?
What are the lock up periods usually?
How does liquidation occur?
Describe the alpha, return, risk for merger arb and distressed securities?
Describe the risk, liquidity and leverage for FI arb? How do valuation differences occur?
How big are the pricing inefficiencies and the correlation between stocks are….., meaning that leverage is …….?
What is the risk, liquidity and leverage for convertible bond arbitrage? What must you do with interest rate, credit and market risk?
Overall gain is achieved if realised equity volatility is….?
Opportunistic strategies can be what?
They are usually divided by technical, fundamental, discretionary and systematic, describe each of these portfolio construction styles?
Global macro, can use a wide variety of assets and is usually ….. and typically ?
They tend to be what?
What is the common theme for leverage?
Mean reverting , low volatility markets offer ….. opportunities? Alpha, return and risk for global macro come from what?
Managed futures: returns are … with bonds and tend to be …… skewed?
What is the majority of capital exposure invested into?
What two trend identification strategies are usually used?
What is the risk, liquidity and leverage profile for Global macro and managed futures?
Risk profile, liquidity and leverage for volatility trading? What is relative value vol arb and Long/Short vol?
What is the reinsurance, life settlement strategy, compare the two?
Describe the risk profile, liquidity and leverage for Fund of funds and multi-strategy HF’s
What is the one factor conditional factor risk model?
What is the multi factor model?
What are the SNP500, USD, VIX and Credit factors?
What are the 4 common functional roles for AI in asset allocation?
What is the role of private equity?
What is the role of hedge funds and Real assets (timber, commodities, farmland?
What is the role of real assets (Infra and energy investments), and role of commercial real estate and private credit?
How does AI diversify equity risk?
How does AI reduce volatility in ST?
How does AI reduce the risk of not achieving long term investor goals?
What is the opportunity investor set using the traditional approach?
What is the investment opp set under risk-based approaches?
What are the strength and weaknesses of the traditional approach?
What are the strengths and limitations of the risk based approach?
What are the risk considerations and return expectations for AI?
What are the investment vehicles of direct investment in LP, FOF, SMA/ fund of one
What is the investment vehicle of mutual fund/VCITS?
What are the liquidity risks from the common investment vehicles - hedge funds?
Liquidity risks for private equity?
What is the liquidity risk for the underlying investment? What are the usual fees?
What are the tax considerations and how does the investment horizon impact decision making ?
How is expertise, transparency and governance considered ?
Asset allocation processes: explain how monte carlo might be used and how optimisation techniques might be used?
Describe risk based approaches?
Describe the issue of stale pricing unsmoothing for AI returns?
Describe the issue of Fat tails and skewness with AI returns?
Describe the two applications of monte carlo?
Describe the portfolio optimisation approach: MVO with/without constraints and Mean-CVAR optimisation
Describe the risk based factor approach?
Describe the issue of maintaining the desired allocation for liquidity planing? What are the uses of a liquidity forecasting model and what do you need assumptions for?
What is the simple liquidity model?
Liquidity example: Calculating target commitment
Liquidity example: Calculating target commitment (continued)
Describe the liquidity issues of managing the capital calls and preparing for the unexpected
Monitoring: What is the investor programme
Monitoring: How to evaluate performance
Monitoring: What things about to be considered regarding the firm and investment process?
a) key person risk - departure may negatively affect the
investment process
b) alignment of interests - money manager’s interests should
remain aligned with investors
Describe the main investment objectives for institutional and non?
Describe the constraint of time horizon?
Describe the constraint of scale and taxes for insto and individual?
Describe the other distinctions of governance, sophistication, regulation and complexity?
Understanding private clients: Describe the personal, financial and other info that is needed to know?
What are the information needed to do with tax considerations? What are the basic and common strategies?
Client goals: Any planned goals or unplanned goals? What is the wealth managers role in managing client goals?
Describe risk tolerance, capacity and perception?
What are the technical skills required to provide investment advice?
What are the soft skills required?
What is capital sufficiency analysis?
What is deterministic forecasting and what does it require?
How is the monte carlo simulation used for capital sufficiency analysis and what inputs are required?
When capital is not sufficient to meet goals what must happen?
Describe the process of converting human capital to financial and thus retirement planning?
Describe the common methods of analyzing retirement goals - Mortality rates, Annuities and MC sim?
Behavioural considerations for retirement planning?
What is the IPS and the benefits of one?
Describe background and investment objectives of IPS?
Background and objectives continued?
What are the investment paramters?
Describe the portfolio allocation and portfolio management part of an IPS?
Parts of IPS: What are the duties and responsibilities and what is in the IPS appendix?
What is the traditional approach for PC, what is the goal based?
What is included in portfolio reporting and portfolio review?
How is success of a portfolio evaluated ?
Goal achievement, process consistency, portfolio performance, definitions of success.
What are the four ethical considerations?
Describe the private client segments of mass affluent and high net worth?
Describe the ultra-high net worth and robo advisors segment?
Describe the characteristics of human capital and what is the definition?
Financial capital: What are the three types of assets?
Compare net worth vs net wealth
Compare the economic balance sheet to the traditional balance sheet?
Explain how human and financial capital change throughout a persons life?
Example continued
Explain how two individuals with the same net worth may not have the same net wealth?
Explain earnings risks and its forms and pre mature death risk?
What are longevity, property, liability and health risks?
Explain the uses of life insurance?
Compare permanent and temporary life insurance?
Permanent: Compare whole life vs universal?
What are riders?
Describe the types of riders and the basic elements of them?
What are the three key pricing considerations ?
What are the two types of insurance companies
Explain cash and policy reserves
What do you need to calculate life insurance? What is disability income insurance?
What are the 3 definitions of disability?
What are the two types of property insurance?
Describe the health/medical insurance elements?
Who are the parties involved in annuities?
Define immediate and deferred annuities?
Describe a deferred variable annuitity?
What does the rider =?
What are deferred fixed, immediate variable and immediate fixed annuities?
How do income yields differ by age for immediate fixed annuity?
What are advanced life deferred annuities and explain flexibility and volatility of them?
Immediate fixed annuity: explain future market expectations and fees?
Immediate fixed annuity: explain inflation concerns and payment methods
Immediate fixed annuity: explain benefit taxation and Mortality credits
Summarises the pros/con of annuity?
Higher annuity allocation if?
What are the factors that contribute to the riskiness of human capital?
What are the five components of the taxation of the components of return?
How is interest taxed and when may be exempt?
How is dividends taxed?
How are cross-border income taxed?
How is capital gains taxed, what is the cost basis?
interest - taxed as ordinary income
- some forms may be exempt (i.e. Municipal Bonds)
Capital gains: formula for taxable gain/loss?
How are short term and long term capital gains taxed?
How are real estate investments taxed?
Describe the different tax statuses of taxable, tax-exempt and tax-deferred.
What are tax havens, territorial tax systems and worldwide tax systems?
What is a tax efficient strategy?
Generally, why are equities more tax efficient?
Why are momentum funds more efficient and style funds less efficient usually?
What is the formula for pre-tax and after tax HPR?
Formula for after tax post liquidation return?
Liquidation tax equals?
What does the return formula assume?
What is AT excess return and AT alpha?
What is the tax efficiency ratio?
Capital accumulation formula for taxable, tax exempt and tax deferred?
For decumulation which accounts are drawn from first, and which if a tax-deferred system?
How is charitable giving treated?
What is tax avoidance and tax evasion?
What are the two main aspects of basic tax management strategies?
How is tax treated in a partnership style investment vehicle?
How is tax managed in a mutual fund?
What is the potential capital gains exposure?
How are taxes managed in ETFS?
What is tax loss harvesting?
What is tax lot accounting and the methods of it?
A quantitative tax management (optimisation method) will do what?
What are the three types of concentrated positions?
What are the risks and tax considerations?
Other factors to consider: degree of concentration and volatility?
Other tax considerations, and the effect on tax liability: tax basis, tax rate of investor, time horizon of investor, restrictions on investor and emotional attachment to contain voting control?
What are the first four approaches to manage tax considerations?
Explain approach of charitable giving and tax avoidance/deferral?
Strategies for managing concentrated positions sin public equities: What is staged diversification and completion portfolio?
Strategies for managing concentrated positions sin public equities: When would equity monetization be used and what does it achieve?
Explain the two step process of hedging position risk then borrowing against the position to achieve EM?
Equity monetisation: how to avoid a constructive sale?
Tax free exchanges: how does this work?
CP = concentrated position
How does charitable remainder trust hedge a CP?
Strategies for concentrated position in private ?
What is a leveraged recapitalisation?
What is an ESOP and how can it be used to diversify concentarted position?
Strategies for RE : How does mortgage financing help diversify a concentrated position?
How can charitable donations be used for RE? DAF is donor advised fund
DAF is donor advised fund
What are the 7 objectives of gift and estate planning/transferring of wealth?
What is a will (testament)?
What is a testator, probate, intestate ?
What are the properties of gifts and bequests and thus the differences?
What is the formula for relative value between gifts and bequests for taxable and tax free?
How does a trust work?
What do irrevocable, revocable, fixed and discretionary trusts? Explain the reason of control for using a trust?
Describe asset control and tax reasons for using a trust?
What are the characteristics of a foundation (legal entity) for transferring assets?
What are the characteristics of life insurance and companies for transferring assets?
What is a family governance and what can it consist of?
What are the essential factors of family governance? What is the board of directors, family council and family assembly?
What is the family office and foundation?
What is the family conflict resolution?
Explain the family dynamic in the context of business exit for transition to new generation and for sale of business?
What happens in regards to the timing of the sale? How is the individual and corporate trustee selected?
What are anti-avoidance rules? How is divorce and incapacity dealt with/the impact of them occurring mitigated?
