CFA 2026 Level II Vignettes Alternative Asset Analysis Hedge Funds Free Quiz 3

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CFA 2026 Level II Vignettes Alternative Asset Analysis Hedge Funds Free Quiz 3

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CFA 2026 Level II Vignettes Alternative Asset Analysis Hedge Funds Free Quiz 3

Practice CFA 2026 Level II Vignettes Alternative Asset Analysis MCQs from Hedge Funds. Get instant results with Explanation.

General10 MCQs

1. Vignette 5: Hedge Funds - Case Study: An investor is conducting due diligence on a hedge fund. What does due diligence involve?

A. Due diligence for hedge funds only involves reviewing the fund's returnsB. Due diligence for hedge funds is not necessaryC. Due diligence for hedge funds only involves the manager's backgroundD. Due diligence includes investment strategy, operational infrastructure, risk management, and legal review

2. What is the role of a prime broker in hedge funds?

A. The prime broker provides trade execution, custody, and financing to hedge fundsB. The prime broker is the fund's managerC. The prime broker is the fund's auditorD. The prime broker is not important for hedge funds

3. What are side pockets in a hedge fund?

A. Side pockets are for liquid assetsB. Side pockets are separate accounts for illiquid assets, with longer lock-up periodsC. Side pockets are the same as the main fundD. Side pockets are not used in hedge funds

4. What is a gates provision in a hedge fund?

A. A gates provision allows unlimited redemptionsB. A gates provision is the same as a lock-upC. A gates provision limits redemptions during stress to protect the fundD. A gates provision is not used in hedge funds

5. How are hedge funds regulated?

A. Hedge funds are not regulatedB. Hedge funds are regulated only by the SEC in the USC. Hedge funds are regulated by the EU onlyD. Hedge funds are subject to regulatory oversight (SEC, AIFMD, etc.) but less than mutual funds

General10 MCQs

6. Vignette 6: Hedge Funds - Case Study: A portfolio manager is considering allocating to hedge funds. What are the diversification benefits of hedge funds?

A. Hedge funds have high correlation with stocksB. Hedge funds can provide diversification due to low correlation with traditional assetsC. Hedge funds have no diversification benefitsD. Hedge funds are perfectly correlated with bonds

7. How should an investor determine the allocation to hedge funds?

A. The allocation to hedge funds is the same for all investorsB. Hedge funds are suitable for short-term investorsC. The allocation to hedge funds depends on risk tolerance, objectives, and liquidity needsD. Hedge funds should be the largest allocation in any portfolio

8. What is a fund of funds (FoF) in hedge fund investing?

A. A fund of funds invests in multiple hedge funds, providing diversification but with additional feesB. A fund of funds is a single hedge fundC. A fund of funds has no feesD. A fund of funds is the same as a mutual fund

9. What factors affect hedge fund performance and allocation decisions?

A. All hedge funds perform equallyB. Hedge fund performance is consistent across strategiesC. Hedge fund performance is not affected by market conditionsD. Hedge fund performance varies by strategy and market conditions; investors should consider these factors

10. How do hedge funds differ from mutual funds in terms of investment strategies?

A. Hedge funds are not allowed to use leverageB. Hedge funds can use leverage, short selling, and derivatives, unlike mutual fundsC. Hedge funds are the same as mutual fundsD. Hedge funds cannot short sell

📋 CFA - Test Online Practice Quizzes

CFA

Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 135 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

Alternative Investments: 8 MCQs
Corporate Issuers: 7 MCQs
Derivatives: 5 MCQs
Economics: 7 MCQs
Equity Investments: 12 MCQs
Ethics: 16 MCQs
Financial Statement Analysis: 11 MCQs
Fixed Income: 11 MCQs
Portfolio Management: 9 MCQs
Quant Methods: 6 MCQs

Merit Formula: -

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