By Schweser Kaplan

ISBN-10: 1427727287

ISBN-13: 9781427727282

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Additional resources for Schweser Notes, 2011 Cfa Exam, Level 3- Book 4 – Alternative Investments, Risk Management, and Derivatives

Example text

Equity long-short) represent the largest hedge fund classification in terms of assets under management. These strategies take long and short positions in under- and over-valued securities, respectively, similar to equity market neutral strategies. The difference is that hedged equity strategies do not focus on balancing the positions to eliminate systematic risk and can range from net long to net short. 9. a. deal arbitrage) focuses on returns from mergers, spin-offs, takeovers, et cetera. For example, if Company X announces it will acquire Company Y, the manager might buy shares in Y and short X.

Disadvantages of direct equity real estate investing: s Lack of divisibility means a single investment may be a large part of the investor’s portfolio. s High information cost, high commissions, high operating and maintenance costs, and hands-on management requirements. s Special geographical risks, such as neighborhood deterioration and the political risk of changing tax codes. Page 40 ©2010 Kaplan, Inc. h Venture capital issuers include formative-stage companies and expansion-stage companies.

The point is to achieve diversification, but the extra layer of management means an extra layer of fees. Often, a FOF offers more liquidity for the investor, but the cost is cash drag caused by the manager keeping extra cash to meet potential withdrawals by other investors. Despite the drawbacks, FOF are good entry-level investments because the manager of the FOF exercises due diligence. , a better benchmark) because they suffer from less survivorship bias. If a FOF includes a fund that dissolves, it includes the effect of that failure in the return of the FOF, while an index may simply drop the failed fund.

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Schweser Notes, 2011 Cfa Exam, Level 3- Book 4 – Alternative Investments, Risk Management, and Derivatives by Schweser Kaplan


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