Alternative Investments - Alternative Investments Section 2
- Option : C
- Explanation : The commodity index is constructed using commodity futures and not the underlying commodities. Hence, there can be differences between the commodity index returns and the returns on the underlying commodities.
- Option : B
- Explanation : Concentrated portfolio strategies reduces diversification benefit as it involves only a few securities, strategies or manager. But it may enable investors to achieve alpha.
48. Which of the following is most likely a reason for investing in venture capital?
- Option : C
- Explanation : Venture capital investing has higher risk involved than the publicly traded stocks, therefore the returns are also higher
- Option : A
- Explanation : Hedge funds generally do not reveal their holdings therefore Patrick will have difficulty in determining if different portfolios are holding diverse or concentrated positions (both within each fund and between funds). Longshort equity hedge funds invest in liquid, publicly traded equity, therefore the underlying positions can be reversed easily and there is no need for independent valuations because current market prices are available.
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