- CFA Exams
- CFA Level I Exam
- Topic 8. Alternative Investments
- Learning Module 1. Alternative Investment Features, Methods, and Structures
- Subject 1. Types and Categories of Alternative Investments
CFA Practice Question
Alternative investments are usually characterized by:
II. High fees.
III. High liquidity of underlying investments.
I. High use of leverage.
II. High fees.
III. High liquidity of underlying investments.
Correct Answer: I and II
Low liquidity instead.
User Contributed Comments 2
| User | Comment |
|---|---|
| ankurwa10 | Don't know how accurate I am on this but since alt investment managers seek better than market returns, and leverage is used to magnify returns (of course magnifies losses too :P) so, leverage is usually a feature of alternative investments. |
| ascruggs92 | Yes, but one can do that without an AI vehicle (they can just open a margin account with a broker). I got that wrong, but now that I'm thinking about it, almost all the examples they gave in the notes are characterized by high leverage (i.e. Real Estate, Private Equity, Hedge Funds), so I guess from that standpoint II makes sense. |