NO.PZ2023010407000002
问题如下：
William Gary, CFA, is meeting with his client, Ross Franco, to
discuss the addition of hedge fund exposure to Franco’s portfolio. Franco has
been reading recently about the benefits of alternative investments and is
considering adding these to his portfolio.
Franco is especially interested in Alpha Fund, a hedge fund that creates and uses complex quantitative strategies with the goal of eliminating any impact of general market movements. Franco admits that, while he has a vague understanding of what different hedge fund strategies entail, he would like Gary to explain the market-neutral concept in more detail. Gary begins by discussing the strengths and weaknesses of a market-neutral strategy and when its implementation is most appropriate.
Identify three potential benefits of investing with Alpha Fund over a
typical long-short strategy fund.
Identify two risks of the example equity market neutral strategy Gary
described
选项：
解释：
Benefits of an
equity market neutral strategy over a long-short strategy include:
• More diversification from a more quantitative
methodology.
• No constraints stemming from the need for an event
or expertise in a specific sector.
• Lower standard deviation due to the removal of
general market movement (no beta risk).
• More liquidity since positions are adjusted over
shorter time horizons.
Risks of an equity
market neutral strategy include:
• The general market could trend upward with no
benefit to the portfolio.
• The success of the strategy is sensitive to historical
data.
• The long position could decrease and the short
position could increase in value.
The benefits of investing with a hedge fund are as below:
i. it can better manage the risk of the portfolio.
ii. it can diversify the portfolio.
iii. the expected portfolio beta is approximately equal to zero
The risks of the equity market neutral strategy:
i. typically mush apply leverage.
ii. less alpha.
