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trade sale: sale of a company to a strategic buyer such as a competitor- IPO- Recapitalization
real estate investment trusts - may provide equity financing for
purchases, sells shares publicly to raise funs to make property
purchases; investors get access to diversified real estates portfolios
with professional management
managers have big fees - willing to take big risks
- management fee (1%-3%) from committed capital. After committed
capital is fully invested, the fees are paid only on the funds remaining
in the investment vehicle- mostly GP doesn't earn incentive fee til LPs
receive their initial investment back. Incentive fee approximately 20%
for GP, LP receives 80% of total profit plus ROI
best funds survive and only those are included in the index
- investing in a privately owned company or a public company intending
to make them private- structured as partnership where outside investors
are Limited Partners (LPs) and the private equity firm is General
Partner (GP)
assets' market values are only estimated, is not based upon transactions
uses estimated values (appraisals) as inputs to the indices; rely on
comparable sales and cash flow analysis technique, subjective; low
volatility and low correlation with important indices (S&P 500)
1) market/comparable approach: values a company by using multiples of
different measures- EBITDA (earnings before interest, taxes,
depreciation, amortization). The multiple = Market value of similar
public companies/EBITDA (for instance, 10xEBITDA is a multiple)2)
discounted cash flow (DCF) approach: values a company as PV of future
cash flows3) asset-based approach: assets minus liability
Net asset value of a mutual fund is the value of the investment
company's assets minus liabilities, stated on a per-share basis. Share
price of an open-end fund always equals to NAV (investment company must
redeem share at current market value); share price of a closed-end fund
may or may not equal to NAV since share price is determined in the
secondary market. Share price of a closed-end fund might trade at a
premium (share price > NAV) or discount (share price < NAV)
buy shares of commodity firms, exposure to commodity price changes
uses the prices of publicly traded shares of REITS to construct the
indices; the more frequently the shares trade, the more reliable
invest in securities from all over the world, including those from the investment company's home country
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