CFA Level I · CFA Level I Exam · Hedge Funds
An investor in a hedge fund is subject to a lockup period. The lockup most likely:
A lockup most likely restricts the investor from redeeming capital for an initial specified period. This lets the manager hold less liquid positions without forced selling. It is different from a hurdle rate, which sets a return threshold before incentive fees apply.
- Arestricts the investor from redeeming capital for an initial specified timeCorrect
- Bguarantees that the fund's net asset value will not decline
- Csets the minimum return the manager must earn before charging fees
Explanation
A lockup prevents redemptions for an initial period, allowing the manager to pursue less liquid strategies. A minimum return before fees is a hurdle rate, and a lockup gives no NAV guarantee.
Did you get it right without looking?
One question tells you little. A timed set on Hedge Funds shows your real accuracy, how long you take and where you lose marks.
More Hedge Funds questions
- A relative value fund earns a 1.5% annual spread on a market-neutral position by using leverage of 8 times its equity capital, and borrowing…
- Compared with traditional long-only mutual funds, hedge funds are most likely to:
- A hedge fund manager bases positions on analysis of interest rate trends, inflation and currency movements across countries, and takes direc…
- A hedge fund database adds a newly launched fund and also incorporates the fund's strong returns from before it joined the database. The res…
- A hedge fund buys undervalued stocks and sells short overvalued stocks, and it keeps its net market exposure between 0% and 50% long, so it …
- A long/short fund has USD 100 million of capital. It holds USD 120 million in long positions and USD 70 million in short positions. The fund…