Thông tin tài liệu
Reading 26 Alternative Investments Portfolio Management FinQuiz.com FinQuiz.com CFA Level III Item-set - Solution Study Session 13 June 2018 Copyright © 2010-2018 FinQuiz.com All rights reserved Copying, reproduction or redistribution of this material is strictly prohibited info@finquiz.com FinQuiz.com © 2018 - All rights reserved Reading 26 Alternative Investments Portfolio Management FinQuiz.com FinQuiz Level III 2018 – Item-sets Solution Reading 26: Alternative Investments Portfolio Management Question ID: 13009 Correct Answer: A The factors which need to be considered when hiring an active manager for managing an institution’s investment portfolio include: Market Opportunity Investment Process Organization People Terms and Structure Service Providers Documents Write-Up The first factor, ‘market opportunity’, involves identifying market opportunities/inefficiencies and evaluating the cause of these opportunities Property addresses this factor as the chief executive highlights the need for the prospective manager to be able to capture and size market opportunities (‘big market fish’) when market inefficiencies exist (‘the situation permits’) The second factor, ‘investment process’, involves studying the investment process of the active manager or management firm Property does not address this factor The fourth factor, ‘people’, involves assessing the experience, intelligence, and integrity of the candidate’s staff Property does not address this factor Question ID: 13010 Correct Answer: C By stressing on how they would like their prospective active manager to manage the pension fund’s investment portfolio, the chief executive is addressing the importance of evaluating the investment process of the active manager or management firm Question ID: 13011 Correct Answer: A In general, the issue of the suitability of an investment to a client’s portfolio is more acute for an individual client as opposed to an institutional client Relative to investment suitability, institutional clients such as Jiah Noyce Inc should be more concerned with the quality of the asset management firm’s service providers and any documents concerning the asset management firm These documents include audit reports or reports on internal controls FinQuiz.com © 2018 - All rights reserved Reading 26 Alternative Investments Portfolio Management FinQuiz.com Question ID: 13012 Correct Answer: A An investment in a real estate operating company represents an indirect form of real estate investment Thus the most appropriate benchmark for an indirect real estate investment is the NAREIT index The NCREIF index represents a benchmark for direct real estate investments The NCREIF index represents unleveraged investments However this benchmark is not a suitable performance benchmark for a leveraged indirect real estate investment like the investment made in Propertex (60% of the investment is funded by debt) Since REITs, underlying the NAREIT index, represent a leveraged form of real estate investment, the volatility of the NAREIT index is higher compared to the unsmoothed NCREIF index The extremely low standard deviation of NCREIF index returns is indicative of the volatility dampening associated with smoothing because of stale valuations After correction for smoothing, the volatility of the NCREIF index doubles Based on the data provided, benchmark A appears to be a NAREIT index This is because the benchmark has the highest volatility, relative to B and C, indicating that investments underlying the benchmark are leveraged Benchmark B represents a smoothed NCREIF index This is because B’s volatility is extremely low relative to benchmark A and relative to its returns (indicating that the index components have been smoothed) Benchmark C represents an unsmoothed NCREIF index as its volatility is higher relative to B and lower to A indicating smoothed returns has been corrected Thus benchmark A, representing a NAREIT index, is the most appropriate performance benchmark for an investment made in Propertex Question ID: 13013 Correct Answer: A Issuers of venture capital include: Formative-stage companies: This group ranges from newly formed companies, to young companies beginning their product development, to companies just beginning to sell a product Expansion-stage companies range from young companies which need financing to expand sales, to established companies with significant revenues, to companies preparing an IPO for their stock Based on the details provided on Respiro, it is a formative stage company as they are in the process of developing their drug The financing stages of venture capital firms include: 1) The early-stage financing – this stage includes the following stages: Seed – seed money is a relatively small amount of money provided to entrepreneurs to form a company and prove that the idea has a reasonable chance of commercial success Start-up – at this stage, the company has been formed with its idea proven The company needs money to bring its product into commercialization This is a pre-revenue stage FinQuiz.com © 2018 - All rights reserved Reading 26 Alternative Investments Portfolio Management FinQuiz.com First Stage – at this stage, the company may have exhausted their seed and start-up funds and may seek additional funds 2) Later-stage financing: This stage involves the financing of those companies which need funds to expand their sales Respiro is currently in the start-up financing stage as it has proved its idea to develop the drug by having its research approved Presently, Respiro requires funds to develop its drug providing further evidence that it is in this financing stage Question ID: 13014 Correct Answer: B Direct investment in commodities involves directly investing in the physical commodity whereas an indirect commodity investment involves investing in the stock of a firm whose principal business deals with the commodity An investment in Felopia Inc.’s stock (investment A) and an investment in the commodity ETF both represent indirect forms of commodity investment FinQuiz.com © 2018 - All rights reserved .. .Reading 26 Alternative Investments Portfolio Management FinQuiz. com FinQuiz Level III 2018 – Item- sets Solution Reading 26: Alternative Investments Portfolio Management Question ID: 130 09... internal controls FinQuiz. com © 2018 - All rights reserved Reading 26 Alternative Investments Portfolio Management FinQuiz. com Question ID: 130 12 Correct Answer: A An investment in a real estate operating... commercialization This is a pre-revenue stage FinQuiz. com © 2018 - All rights reserved Reading 26 Alternative Investments Portfolio Management FinQuiz. com First Stage – at this stage, the company
Ngày đăng: 18/10/2021, 16:12
Xem thêm:
