5.6 Hedge Funds

Under the Investment Company Act of 1940, which of the following is not considered and investment company

Hedge fund

Which of the following is not a characteristic associated with hedge funds

They are regulated under the investment company act of 1940

Hedge funds are considered

a form of private investment company and, therefore, unregulated

Hedge funds attempt to

achieve high return and are, therefore, associated with high-risk investments

In explaining hedge funds to an investor, a registered representative might correctly characterize them as utilizing

advanced and complicated strategies entailing high risk

Hedge funds

are not regulated under the investment company act and no securities and exchange commission registration is requried

A hedge fund is permitted to do which of the following that a mutual fund is not permitted to do

invest in commodities and currencies

All of the following would be associated with hedge funds except

investing in government debt securities

A hedge fund having a lock-up provision means that

investors are required to maintain the investment for a minimum length of time

Which of the following types of investments is least likely to be a major investment strategy for hedge funds

money market instruments

A hedge fund portfolio has been characterized as being highly leveraged. This means that

there is substantial borrowing or purchasing on margin

For hedge funds organized as private investment partnerships, which of the following is true

they can limit the number of investors and require large or minimum initial investments

Identify two trading strategies that a hedge fund could employ in its portfolio but a mutual fund cannot

trading on a margin to purchase portfolio securities and selling short stocks

Investors in hedge funds should know that the funds are

unregulated but must abide by laws that investors be accredited