Questions:
407.1. Peter is an analyst who works for a hedge fund. Unlike many of his peers from business school, who work for funds that cannot much drift from their somewhat narrowly defined investment styles, Peter's fund has broad discretion with respect to both location of opportunity and trade tactics. He employs a combination of both top-down and bottom-up techniques. However, his fund does tend to make directional bets in liquid, often highly liquid, markets. For which type of hedge fund does Peter most likely work?
a. Equity market neutral
b. Global macro
c. Convertible arbitrage
d. Distressed debt
407.2. Barbara is an analyst who works for a hedge fund. Her fund has a so-called "non-directional" investment style; and, in fact, the fund's historical correlation with major market indexes (e.g. S&P 500) has consistently been very low. Her last trade was based on the view (prediction) that a company would announce weaker-than-expected quarterly earnings, anticipating an impact to the stock but no impact to the company's bond. To express this view, Barbara's fund purchased puts on the company's stock while also writing credit protection by going short a credit default swap (CDS) on the company's bond. For which type of hedge fund does Barbara most likely work?
a. Distressed debt
b. Global macro
c. Capital structure arbitrage
d. Multi-strategy fund of funds
407.3. Sam is an analyst who works for a hedge fund. Academically, Sam's fund is classified as event-driven and, therefore, is considered a non-directional strategy. Sam's primary job is to identify publicly-traded companies that suffer from a so-called "conglomerate discount:" companies that are appropriately penalized by the markets due to a lack of strategic focus. His current favorite is a company that grew rapidly in recent years but not due to organic growth; rather, the company's managers were naively rewarded for growth through acquisition even as they were not paying attention to capital utilized. His economic value added (EVA) analysis demonstrates that, despite top-line growth, managers have been actually eroding long-term shareholder value. His firm's plan is to acquire a significant stake in the company and directly advocate for management changes and divestiture of some divisions, in order to restore focus and accountability. For which type of hedge fund does Sam most likely work?
a. Activist
b. Quantitative
c. Global macro
d. Fund of funds
Answers here:
407.1. Peter is an analyst who works for a hedge fund. Unlike many of his peers from business school, who work for funds that cannot much drift from their somewhat narrowly defined investment styles, Peter's fund has broad discretion with respect to both location of opportunity and trade tactics. He employs a combination of both top-down and bottom-up techniques. However, his fund does tend to make directional bets in liquid, often highly liquid, markets. For which type of hedge fund does Peter most likely work?
a. Equity market neutral
b. Global macro
c. Convertible arbitrage
d. Distressed debt
407.2. Barbara is an analyst who works for a hedge fund. Her fund has a so-called "non-directional" investment style; and, in fact, the fund's historical correlation with major market indexes (e.g. S&P 500) has consistently been very low. Her last trade was based on the view (prediction) that a company would announce weaker-than-expected quarterly earnings, anticipating an impact to the stock but no impact to the company's bond. To express this view, Barbara's fund purchased puts on the company's stock while also writing credit protection by going short a credit default swap (CDS) on the company's bond. For which type of hedge fund does Barbara most likely work?
a. Distressed debt
b. Global macro
c. Capital structure arbitrage
d. Multi-strategy fund of funds
407.3. Sam is an analyst who works for a hedge fund. Academically, Sam's fund is classified as event-driven and, therefore, is considered a non-directional strategy. Sam's primary job is to identify publicly-traded companies that suffer from a so-called "conglomerate discount:" companies that are appropriately penalized by the markets due to a lack of strategic focus. His current favorite is a company that grew rapidly in recent years but not due to organic growth; rather, the company's managers were naively rewarded for growth through acquisition even as they were not paying attention to capital utilized. His economic value added (EVA) analysis demonstrates that, despite top-line growth, managers have been actually eroding long-term shareholder value. His firm's plan is to acquire a significant stake in the company and directly advocate for management changes and divestiture of some divisions, in order to restore focus and accountability. For which type of hedge fund does Sam most likely work?
a. Activist
b. Quantitative
c. Global macro
d. Fund of funds
Answers here:
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