- CFA Exams
- CFA Level I Exam
- Topic 8. Alternative Investments
- Learning Module 6. Hedge Funds
- Subject 2. Hedge Fund Investment Risk, Return and Diversification
CFA Practice Question
Market neutral funds are best described as:
B. Funds managed to have no exchange rate risk.
C. Funds managed to have net neutral exposure to equities.
A. Funds managed to have no interest rate risk.
B. Funds managed to have no exchange rate risk.
C. Funds managed to have net neutral exposure to equities.
Correct Answer: C
Market neutral funds are stock funds that take long positions in undervalued stocks and short positions in overvalued stocks, but on average the value of long positions equal the value of short positions, so that the overall fund is neither long nor short with respect to equities.
User Contributed Comments 3
| User | Comment |
|---|---|
| vatsal92 | Market here refers to equities. |
| khalifa92 | buy long sell short |
| ewantanner | uy high sell low. |