Ben Leesom, CFA, thinks distressed securities are appropriate for one of his clients and would like to include them in his client’s portfolio. If liquidity is important for the client, then Leesom should recommend: A) neither an investment with a hedge fund structure nor a private equity structure. B) investments with either a hedge fund structure or a private equity structure. C) an investment with a hedge fund structure over a private equity structure. Your answer: A was incorrect. The correct answer was C) an investment with a hedge fund structure over a private equity structure. i thought hedge funds typically have lock-up periods as well?
The key point shall be the difference between hedge fund structure and a private equity structure. It seems that hedge fund structure does not mean regular “hedge fund” and private equity structure does not mean regular “private equity fund”. Anyone can explain ?
hedge fund structure 1-3 year PE 7year and closed
A private equity fund is typically never liquid and usually requires a 5-7 year commitment On the other hand, while many hedge funds ask for lockup periods, many don’t A funds of hedge funds is typically very liquid and therefore can be a suitable option in this case
maybe just a crap question. If liquidity is important, shouldnt be recommending structures where funds are tied up 1-3 years
If liquidity is important, why are distressed securities even being considered? When a company is distressed, the only other interested parties you can sell to are other distressed securities investors. Totally inconsistent with the IPS.