CFA Practice Question

There are 139 practice questions for this study session.

CFA Practice Question

Differences between hedge funds and mutual funds are:

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.
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