- CFA Exams
- CFA Level I Exam
- Topic 8. Alternative Investments
- Learning Module 6. Hedge Funds
- Subject 1. Hedge Fund Investment Features
CFA Practice Question
Differences between hedge funds and mutual funds are:
II. Investors can buy shares of hedge funds in the open market.
III. A typical hedge fund transaction gives consideration to the specific tax needs of its investors.
IV. The minimum required investment is much higher for a hedge fund than that for a mutual fund.
I. Most hedge funds are exempt from many reporting requirements for the typical public investment company.
II. Investors can buy shares of hedge funds in the open market.
III. A typical hedge fund transaction gives consideration to the specific tax needs of its investors.
IV. The minimum required investment is much higher for a hedge fund than that for a mutual fund.
Correct Answer: I and IV
II: Most hedge funds are not offered for sale to the general public. They can only be sold via private placement. IV: the minimum investment is typically $250,000 for a hedge fund.
User Contributed Comments 4
| User | Comment |
|---|---|
| johntan1979 | III FACT: Hedge funds don't give a damn about your taxes. |
| johntan1979 | UPDATE on IV: Most hedge funds nowadays require a minimum of $1 million |
| ankurwa10 | On point (iii) while I do not have the experience of a hedge fund, fund-of-funds generally do seem to give consideration to tax requirements, don't they? Just asking. |
| ewantanner | It would be very difficult for a fund to consider the tax situation of all the individual investors. It is the investor's duty to make sure that the funds strategy matches with their projected tax situations. |