CFA Level I · CFA Level I Exam · Portfolio Management: An Overview
A pension fund wants to invest in a professionally managed pool of private assets, accepting limited liquidity in exchange for the manager's flexibility to use leverage and short selling. Which pooled vehicle is most likely appropriate?
A hedge fund set up as a limited partnership is most appropriate. Such funds are privately offered, have restricted liquidity such as lockups, and can use leverage and short selling. Money market funds and broad index ETFs are highly liquid and restricted in strategy.
- AA hedge fund structured as a limited partnershipCorrect
- BA money market mutual fund
- CA broad-market index ETF
Explanation
Hedge funds are typically private limited partnerships with limited liquidity (lockups, notice periods) and use leverage and short selling. Money market funds and index ETFs are liquid, regulated and generally avoid such strategies.
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