Alternative Investments

Question 1

Hedge Fund Strategies

Answer 1

• Event-driven strategies: merger arbitrage; distressed/ restructuring; activist shareholder; special situations.
• Relative value strategies: convertible arbitrage; asset-backed fixed income; general fixed income; volatility; multi-strategy.
• Equity strategies: market neutral; fundamental growth; fundamental value; quantitative directional; short bias.
• Macro strategies: based on global economic trends.

Question 2

Venture Capital stage

Answer 2

• Formative stage: angel investing, seed stage, early stage.
  
  • Angel investing: Plan business, assess potential
  • Seed stage: Develop & market product
  • Early stage: Start production.
• Later stage: finance product development, marketing, market research.
• Mezzanine stage: prepare for IPO

Question 3

Property valuation method

Answer 3

• Comparable sales
• Income approach
• Cost approach

Question 4

PE exit strategy

Answer 4

• Trade sale
• IPO
• Recapitalization
• secondary sale
• write-off

Question 5

Commodity Future price

Answer 5

Futures price ≈ spot price ( 1 + R_f ) + storage costs – convenience yield

Question 6

Source for commodity investment return

Answer 6

• Collateral yield: the return on the collateral (T-bills) posted to satisfy margin
• Price return: due to change in spot price.
• Roll yield: the gain or loss resulting from re-establishing positions as contracts expire. positive for backwardation, negative for contango.
  
  • Contango: futures price > spot price.
  • Backwardation: futures price < spot price.