Hedge Funds
KNOWLEDGE EXPECTED OF: QAFP® Professionals
Highest Knowledge Level: Awareness
Knowledge Levels and Associated Verbs
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
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Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
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Application
Ability to put information to use / to use knowledge for relevant, practical purposes
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Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
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Define
To state exactly the meaning of
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Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
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Hold cursor over or click on each term to read its definition.
- Define a hedge fund.
- Identify the primary investment objectives typically associated with a hedge fund.
- Growth of capital
- Identify structures of hedge funds, such as:
- Trust
- Limited partnership
- Corporation
- Identify that hedge funds must be approved by the securities administrator of the province/territory in which they are traded, and that, compared to other investments, they are lightly regulated.
- Identify that hedge funds are generally offered via offering memorandum as private offerings to sophisticated / accredited investors.
- Identify that funds of hedge funds are available for public purchase on an exchange.
KNOWLEDGE EXPECTED OF: CFP® Professionals
Highest Knowledge Level: Evaluation
Knowledge Levels and Associated Verbs
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
||||||
---|---|---|---|---|---|---|---|---|---|
Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Define a hedge fund.
- Identify the primary investment objectives typically associated with a hedge fund.
- Growth of capital
- Identify structures of hedge funds, such as:
- Trust
- Limited partnership
- Corporation
- Identify that hedge funds must be approved by the securities administrator of the province/territory in which they are traded, and that, compared to other investments, they are lightly regulated.
- Identify that hedge funds are generally offered via offering memorandum as private offerings to sophisticated / accredited investors.
- Identify that funds of hedge funds are available for public purchase on an exchange.
Additional Knowledge Expected of CFP Professionals
- Determine how each of these factors may impact the suitability of a hedge fund:
- Time horizon
- Volatility
- Risk tolerance
- Investment objective
- Financial situation
- Personal situation
- Income
- Liquidity
- Control
- Tax impact
- Investment management process
- Economic cycle
- Cost
- Historical performance
- Performance expectations
- Evaluate how each of the factors may impact the suitability of a hedge fund.
- Explain for whom a hedge fund may be suitable.
- Explain characteristics of a hedge fund, such as:
- Relative potential for loss of capital
- Level of liquidity
- Relative level of volatility
- Explain risks that may affect a hedge fund.
- Explain types of income that may be generated by a hedge fund, such as:
- Interest income
- Dividends
- Capital gains
- Explain fee structures for hedge funds, such as:
- Management fee
- Performance charge
- Hurdle rate
- High water mark
- Estimate the return that a hedge fund needs to make before it earns positive return.
- Interpret the return for a hedge fund.