CFA Latest CFA Level 1 Discussions Question of the Week – Alternative Investments

Question of the Week – Alternative Investments

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    • AdaptPrep
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      The commodity market
      initially grew due to producers desiring a hedging vehicle. Recently
      institutions like pension plans and hedge funds have looked to commodities as a
      way to diversify and grow, respectively.

      Which of the following least describes the impact this institutional money has had?

      • Contango has become less extensive
      • Rolls have become more expensive
      • Potential for bubbles has increased
    • AdaptPrep
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      All of the above have been a
      part of the change in commodities except contango becoming less extensive. In fact, the opposite is true. Backwardation used to be
      the norm, since producers had to pay a premium in order to hedge. As investors
      and speculators have increased, that situation has become less prevalent.

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