Deck 18: Alternative Investments

Question 1

Business ideas need money,and it is easiest for a business to try to raise money through a public float.

Answer 1

False
Explanation: Business ideas need money,and it is simply not feasible for a business to try to raise money through a public float when it is at an early stage,often without a confirmed product or market.

Question 2

Which factor did Guo,Lev and Zhou (2005)find plays an important role in the success of a venture capital?

Answer 2

D
Explanation: Venture capitalists can play an important role in the business success through reputational signalling.Guo,Lev and Zhou (2005)examine factors associated with biotech IPOs.They find that the quality of the underwriters and venture capital backing,as well as product-related and intellectual property fundamentals,can explain around 60-80% of the pricing of the IPO.

Question 3

Which of the following is type of private equity investors?

Answer 3

C
Explanation: Internal and external investors are two types of private equity investors.

Question 4

Guo,Lev and Zhou (2005)find that several factors play an important role in the success of a venture capital.How much of the IPO pricing can these factors explain?

Question 5

Which of the following is not a stage in the private equity life cycle?

Question 6

Private equity funds:

Question 7

The angel stage of investing is never associated with other cash streams,such as government grants,industry grants and university seed funding.

Question 8

By the end of the 1990s,private equity was worth almost ___ in the USA.

Question 9

A blue-sky company is one that:

Question 10

Biotech firms that make it through to a public float generally undergo how many rounds of venture capital financing?

Question 11

The seminal study of Moskowitz and Vissing-Jørgensen (2002),which has estimated rates of return to private equity in the USA over the 1990s,reports that returns to private equity over the early 1990s were 12.3% p.a.

Question 12

The venture capital stage often involves several tranches of financing in which the amount of the investment and the number of investors grows.

Question 13

Entrepreneurs are humans,but they do not suffer from arrogance and insolence.

Question 14

Brav and Gompers (1997)analyse the short-run performance of venture-backed IPOs in comparison to non-venture-backed IPOs.

Question 15

Private equity returns are difficult to estimate due to the fact:

Question 16

Private equity is usually sourced from a few select wealthy individuals or specialist funds who are willing to contribute a relatively large proportion of the capital required to propel the business forward.

Question 17

The range of businesses in which private equity is held tends to be concentrated in:

Question 18

Venture capitalists are rarely involved in the governance and management of a venture that they finance.

Question 19

Alternative investments (AI)do not generally represent an asset class that tends to be restricted to professional fund managers and very large private investors.

Question 20

Moskowitz and Vissing-Jørgensen (2002)estimate that,for those households that hold private equity,that investment represents 41% of household wealth.

Question 21

Several studies into returns from venture capital funds have generally supported the notion of high returns.What arithmetic return on financing rounds to IPO did Cochrane (2005)report?

Question 22

Over the period,the average annual return on the hedge fund index was p.a. ,which is better than the average annual return on the world index of 10.8% p.a. ,but worse than Australia at p.a.and worse than the emerging market index at 20% p.a.

Question 23

The long-short strategy is one of the most common strategies in the hedge fund industry and relies upon:

Question 24

Which is the round of funding where the business should be generating some external revenue?

Question 25

Please refer to figure 18.8.The hedge fund index has been more stable and has generally exhibited the least volatility,given that it represents what is,essentially,a diversified portfolio across a diversified series of strategies.
What is the average performance fee for a hedge fund in Australia?

Question 26

Which type of fund has the objective to establish an overall position that is uncorrelated with traditional asset classes?

Question 27

Once a business is at the stage of the IPO,how much does the lead venture capitalist,on average,hold of the firm?

Question 28

The investment strategy of a hedge fund is to invest in:

Question 29

Once adjusted for risk,the beta estimate of venture capital firms is approximately:

Question 30

Which of the following are characteristics of a hedge fund?
I)Pooling of assets
II)Strict regulatory oversight by the SEC
III)Investing in equities,debt instruments,and derivative instruments
IV)Professional management of assets

A)I and II only
B)II and III only
C)III and IV only
D)I,III,and IV only

Question 31

Which type of hedge fund may monitor the futures and spot markets to identify situations when prices in the two markets depart from the cost-of-carry model?

Question 32

After five years post listing,venture-backed IPOs earn a cumulative return of:

Question 33

Which capital is generally the largest of the venture capital fund-raising rounds?

Question 34

At which funding round does the business appear to have a good product but it is not generating sufficient income?

Question 35

After five years post listing,non-venture-backed IPOs earn a cumulative return of:

Question 36

From a portfolio perspective,infrastructure assets are regarded as _________risk,but offering a return.

Question 37

Once a business is at the stage of the IPO,how much do the venture capitalists,on average,hold of the firm?

Question 38

Which type of hedge fund examines relationships between global markets to find relationships that do not conform with economic theory?

Question 39

The distribution of returns to venture capital is:

Question 40

Hedge funds tend to be characterised by: