Fit Questions

Question 1

What is a hedge fund?

Answer 1

Hedge funds are alternative investments that use pooled funds to employ different strategies to earn an active return, or alpha, for their investors.

Question 2

What are alternative assets?

Answer 2

• Alternative assets are active investments and not passive investments
  
  1. Must manage the tradeoff between the risk with the reward

Question 3

Why BAAM/Blackstone?

Answer 3

• The Hedge Fund Solutions group is the undisputed global leader
• Constantly evolving and thinking of new ways to exceed expectations and reach their client’s goals
  
  • I really like the client-centered philosophy
    
    • Custom-tailored strategies for each client
• They are trusted by the largest institutional investors
  
  • Really like the connection to pension funds
  • Pension funds depend on and trust BAAM to grow their assets
    
    • Preserve the capital that millions of people rely on
    • Protecting the financial futures of people around the world

Question 4

Why investing?

Answer 4

• Exciting and interesting because it is constantly evolving
  
  • Markets conditions are always changing
  • Requires investors to stay on their toes
  • To be successful, you need to be creative and have a lot of grit

Question 5

Why invest in alternative assets?

Answer 5

1. Effective alternative strategies can offer higher expected returns per unit of risk than the traditional long equity and fixed income strategies
2. Alternatives can offer additional benefits such as hedging against inflation, interest rate volatility, and market risk
3. Low correlation to traditional asset classes

Question 6

What are the alternative investment categories?

Answer 6

1. Hedge Funds
   
   • generate alpha, or returns, with less volatility than public equity markets
2. Private Equity
   
   • receive premiums on illiquidity of investments
3. Real Assets
   
   1. diversify, generate income, and gives inflation-sensitive exposure
      
      • Real Estate
      • Commodities
      • Gold

Question 7

What do you know about BAAM?

Answer 7

• largest allocator of capital to hedge funds
• $72 billion AUM
• innovation is key to continued success

Question 8

Do you think hedge funds will generate higher or lower returns in the future, and why do you think so?

Answer 8

• higher returns because we are on an 8+ year market rally and are bound to experience a recession of some sort
  
  • when recession hits, hedge funds will outperform public equity markets

Question 9

What is a risk-adjusted return?

Answer 9

• the return on an investment relative to its risk profile
• finding an investment that has greater returns than the benchmark with less risk

Question 10

What is BAAM’s investor base?

Question 11

How are alternative asset managers rewarded?

Question 12

Why invest in BAAM?

Answer 12

• Expert due diligence
• monitoring of hedge fund portfolios
• cheaper to invest through BAAM than to hire own team to perform due diligence and to monitor hedge funds
• HFs have a high barrier to entry, requiring anywhere in capital from $1 - $50mm
  
  • Investors that want to limit exposure can gain access to these capital markets through AA managers

Question 13

Why not invest in BAAM?

Answer 13

• investor desires greater control over portfolio and investments
• Double layer of fees

Question 14

How would you put together a HF portfolio?

Question 15

Why does an AA manager invest in multiple HFs?

Answer 15

1. Can aggregate managers of single strategy type
2. Or have a multi-strategy approach, spreading risk across different HF strategies

Question 16

What is the long/short equity strategy?

Question 17

How can HFoF managers differentiate from each other?

Answer 17

their investments and operational due diligence

Question 19

Why BAAM’s investment style?

Question 20

Why buy side?

Question 21

Pitch a Stock