Exam 20: Hedge Funds

Assume that you have invested $500,000 to purchase shares in a hedge fund reporting $800 million in assets, $100 million in liabilities, and 70 million shares outstanding. Your initial lockout period is 3 years. What is your annualized return over the 3-year holding period?

Malkiel and Saha (2005) estimate that the survivorship bias for hedge funds equals 4.4%, which is ________ the survivorship bias for mutual funds.

Unlike market-neutral hedge funds, which have betas near ________, directional long funds exhibit highly ________ betas.

______ are private partnerships of a small number of wealthy investors, are often subject to lock-up periods, and are allowed to pursue a wide range of investment activities.

Assuming positive basis and negligible borrowing cost, which of the following transactions could yield positive arbitrage profits if pursued by a hedge fund?