1. Which of the following factors is most likely to be a characteristic of alternative investments?
A. Narrow manager specialization.
B. High regulation.
C. High transparency.
2. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation.
If the incentive and management fees are calculated independently, the fees earned by SHM is closest to:
A. $7.680 million.
B. $14.928 million.
C. $16.080 million.
3. The value at risk of an alternative investment is best described as the:
A. Fixed amount of loss expected over a given time period at a given probability level.
B. Maximum amount of loss expected over a given time period at a given probability level.
C. Minimum amount of loss expected over a given time period at a given probability level.