Chapter 12: DPPs, REITs & Hedge Funds

The difference between a hedge fund and a mutual fund is:

A mutual fund is more regulated.

Why is carried interest a controversial method of compensating hedge fund managers?

Capital gains tax rates are applied to carried interest rather than the higher income tax rates.

Rules regarding REITs are enforced by the:

Internal Revenue Code

Which of the following best describes emerging markets strategies?

Invest in developing countries that are predicted to perform well in the global economy.

Which of the following is NOT a characteristic of a hedge fund?

Its shares trade on the New York Stock Exchange (NYSE) and can be liquidated quickly.

Which statement most accurately describes part of the hedge fund structure?

Limited partners hold the funds, and general partners manage or grow the fund.

Hedge funds are structured as:

Limited partnerships

Which is an advantage of an investment in a direct participation program?

The ability to earn higher than market returns.

Which answer pertains to the limited partner in a hedge fund's limited partnership arrangement?

This partner provides investment capital to the fund, but does not make investment decisions or have general liability.

To qualify as an accredited investor, an institution must have assets of at-least:

$5,000,000.00

Which of these is a qualification of an accredited hedge fund investor?

a net worth of over a million dollars

Mortgage REITs typically earn income from:

interest

Investing in REITs allow the shareholder to

invest in income-producing real estate

A direct participation program in an oil and gas project could be doing all of these EXCEPT:

investing in public companies producing oil reserves

An investor in a direct participation program (DPP) _____.

is a limited partner

A direct participation program (DPP) pools investor money to _____.

make direct investments in various opportunities

A direct participation program called a business development company _____.

makes loans or buys equity in smaller companies

REITs can be traded publicly on a security exchange or

non-publicly through a broker or financial adviser

Equity REITs typically earn income from

rents

Hedge fund investors are formally known as:

sophisticated investors