Hedge Fund

A hedge fund is an aggressively managed portfolio of investments that uses leveraged, long, short and derivative positions. If you are looking for a job in Hedge Fund, then try our online interview questions that can help you to lend a job.

Q.1 Please explain what makes hedge funds different?
The main distinguishing characteristics are that hedge funds using derivatives, can short sell, and have the ability to use leverage.
Q.2 What is a convertible arbitrage?
It's an investment strategy that seeks inefficiencies of price between a convertible bond and the underlying stock. Managers will typically short the underlying stock and long the convertible bond.
Q.3 When a manager says that he is event-driven what does it mean?
That's an investment strategy seeking to identify and exploit pricing inefficiencies that have been caused by some sort of corporate event, distressed situation, such as a merger, spin-off, or recapitalization.
Q.4 What is the strategy of our fund?
This is specific to the firm you are interviewing with. Try to do the following:
To find any articles on the fund or its founders search the Web.
To find any articles written on the fund search online.
To see if the firm is listed search online databases.
Q.5 Please state the key issues that you think our fund must face?
This is also specific to the firm you are interviewing with. Once you've found the strategy that the fund is pursuing, research the current environment of the fund. For example, look to find any recent announcement mergers and be prepared to discuss your opinions on it, if it is a merger arbitrage strategy. Current news events, market trends, and new financial regulations can also affect a fund's strategy.
Q.6 What important trends do you see in this industry?
With years of my experience in this industry, I've seem more SEC regulation, continued growth in institutional investing, and the potential of offering hedge funds to average retail investors are all key issues.
Q.7 What is Hfm?
Hedge Fund Manager (HFM) is the person who has complete control over the fund.
Q.8 Do You Know What Makes Hedge Funds Different?
Hedge funds use derivatives, are the main distinguishing characteristics the can short sell, and have the ability to use leverage.
Q.9 What is your take of the beta of a company?
This question is primarily asked to test your fundamental understanding of beta neutral investing. The beta of a stock measures how it moves relative to the market. Sample Answer - You can start by saying that "A stock’s beta measures how a stock moves relative to the market. For instance high-tech growers such as Workday (WDAY) typically have beta higher than 1, whereas some consumer staples such as Wal-Mart (WMT) have beta less than 1. Such that stocks having negative beta, indicates they are counter-cyclical to the economy. Beta is crucial in measuring the risks of the portfolio, and in hedging positions to build a beta neutral book.
Q.10 What is the difference between volatility and Beta?
Even though the two sound similar, but they measure two different attributes of a stock. 1. Beta is the measure of a stock relative to the market. Beta is useful for calculating the portfolio’s market risk and for hedging individual positions. 2. Volatility on other hand measures how a stock has moved relative to itself during a time period. Think of it as the stock’s percentage change over a time distance – a day, a month, or a year. Such that dividend stocks tend to have “low volume”, while high-tech or bio-pharma growth stocks tend to be volatile, in particular around earning releases.
Q.11 When do you use EV/EBITDA and P/E?
We often use EV/EBITDA for an accurate comparison among businesses, since it puts firms with different capital structure, tax regime, and account treatment on equal footing. On the other hand P/E is simpler when we compare a firm to the S&P average or firms in the same industry with similar capital structure.
Q.12 Why is not advisable to refer hedge funds for small-scale retail investors?
Generally, hedge funds have a minimum investment size of around $10 million with a risk capacity to lose the entire investment if such a case arise. Here the fund manager is involved as a partner in such an investment but one needs to still have a large risk appetite. Other reason for hedge funds is not advisable for small-scale retail investors because hedge funds involve multiple and complex strategies to maximise their returns it will be difficult for investors to understand and keep track of the same.
Q.13 What do you understand by 2/20 rule?
We can define 2/20 as a compensation structure which is employed by the hedge fund managers based on the performance of the hedge fund. This method focuses on how the hedge fund managers charge a flat 2% of the total asset value as a Management fee and additional 20% on the total profits that have been earned. Such that the Management fee is a mandatory charge that is considered essential for running of the fund and performance fees is an award to the fund manager for gaining returns more than the value of the fund.
Q.14 Performance of a wealth manager depends on which of the following factors?
It dependso n the following factors. Market know-how Obtaining timely and accurate information
Q.15 What is the primary focus of a wealth manager?
Client
Q.16 What are liquid investments
Any investment that can be easily converted into cash without having a significant impact on its value.
Q.17 What is Risk Capacity
It refers to the financial capacity of a client to withstand market loss.
Q.18 When was Indian Wealth tax was incorporated?
1957
Q.19 What is Call option
The right to buy an asset at a certain price.
Q.20 What are Black box funds
Black box funds are those funds where the source of alpha is not clear.
Q.21 What are the drawback of structured products?
The fees involved can be huge The guarantee applies only at the end of the period
Q.22 Where did the 130/30 funds originated
It was originated in USA
Q.23 What factor alters the return distribution of hedge funds
investment strategies
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