CFA Practice Question

There are 139 practice questions for this study session.

CFA Practice Question

Many institutional investors allocate a portion of their portfolios to alternative investments because:

A. alternative investments are less risky.
B. alternative investments offer higher returns.
C. alternative investments typically have low correlation with traditional investments.
Correct Answer: C

Due to low correlation with traditional financial investments, alternative investments are attractive to investors because of potential for diversification and higher returns when added to a portfolio of traditional investments.

User Contributed Comments 5

User Comment
Salim6 Why not B pls ?
greenasha B is talking about returns alone.
C low correlation means attractive, potential for diversification result in higher returns.
GBolt93 go look at average hedge fund returns vs. the market and you'll understand why not b
fabsan These days GBolt93, there is no point to pay high fees for Hedge funds. Most of them are not even beating the market.
joeclark Yea but theoretically, C is correct.
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