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/biz/ - Business & Finance

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11057808 No.11057808 [Reply] [Original]

I just failed my CAIA level 1 exam AMA

>> No.11057824

>>11057808
>I just failed my CAIA level 1 exam
I don't know what this is, but if it has nothing to do with differential equations, it's bullshit.

>> No.11058773
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11058773

>>11057808
I finished all the three levels of the CFA exam, in the first attempt
AMA

>> No.11058807

>>11057808
200 multiple choice questions and you failed? Hahahahahahahahahahaha. Inhales, hahahahahahahahahahah.

>> No.11059050

>>11058773
A hedge fund of funds reports a monthly hurdle rate vis-à-vis large cap stocks of 0.0047. What does this mean?

>A. The fund of funds must earn at least 47 basis points per month to be a valuable addition for risk budgeting purposes.
>B. The fund of funds’ average return over the most recent month is 47 basis points.
>C. The fund of funds’ ratio of average return to standard deviation of return is 47 basis points per month.
>D. On a monthly basis, the fund of funds is expected to earn 47 basis points more than the risk free rate of return.

>> No.11059118

>>11059050
Based on how they define hurdle rate, i'd say A and B are possibly valid. Hurdle rates are used to benefit the investor wherein performance fees are paid out only if returns beat the threshold hurdle rate. Risk budgeting comes into picture when one would choose to allocate their risk budget to the fund assuming it crosses this threshold.
But if i had to pick one, I would say B.

>> No.11059136

>>11059118
However, imho none of those options completely describe hurdle rates.

>> No.11059157

>>11059118
I just pulled that from a sample test. I was thinking A (I've never taken this test)
Average return can be different than the hurdle rate I think? Ie a fund manager wants a higher average return than the fund's hurdle rate so he can collect fees. If you could write in an answer what would it be

>> No.11059214

>>11059157
>a fund manager wants a higher average return than the fund's hurdle rate so he can collect fees
The opposite of this actually.

Think of it this way
>McShekels is a Hedge fund
In this case, this is a fund of funds, so its a hedge fund that invests in other hedge funds. So the fund of fund is the investor in this case.
>Now you want to invest with McShekels
>You need some assurance of getting returns.
>You impose a hurdle rate of 47bps
What this means is, only if McShekels' returns cross 47bps, will they be able to collect performance fees on the excess returns.
If returns do not cross 47bps, all of that goes to you.

So, to clarify, the McShekels manager would want a smaller hurdle rate and you as the investor would want a higher hurdle rate. Conceptually, it is a hurdle is for the hedge fund manager and not the investor.

>> No.11059222

>>11059214
Now that I think of it, answer A seems more plausible. But then again, I am not a hedge fund person nor a performance evaluation person.