CFA CFA Level 1 Question of the Week – Alternative Investments

Question of the Week – Alternative Investments

  • This topic has 2 replies, 2 voices, and was last updated Aug-18 by AdaptPrep.
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    • AdaptPrep
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      Which of the following is least typically a difference between hedge funds and mutual funds?

      • Hedge funds are less liquid.
      • Hedge funds charge management fees.
      • Hedge funds have more strategies available.
    • scarebaer
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      hedge funds have more strategies avail – there are a bijillion mutual funds with strategies that range from money market, debt, options, equities etc etc. most hedge funds are built on one strategy at any given point in time. 

      Hedge funds charge management fees. yes they do, most charge a 2 in 20. 2% of money and 20% of profits. But so do mutual funds. 

      Hedge funds are less liquid. this is absolutely true. Most MF are traded on the open market, or can be liquidated in a day. Hedge funds typically state you can’t take your money out for a period of time (industry std 1 year) 

      Now having said all of that, I actually don’t know what the answer is. I refer to least typically a difference meaning not a difference. Since A is true and C is false, I guess B is the answer given that they both DO charge management fees. Even though I did put A without carefully reading the question

    • AdaptPrep
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      All of the above are true about hedge
      funds. However, like hedge funds, mutual funds also charge management fees. The fee amount and structure are
      very different (fees are typically higher on hedge funds), but they are present
      in both.

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