Browse CFA Level 1

Chapter 6: Hedge Funds

Chapter 6: Hedge Funds (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.

In this section

  • Overview of Hedge Fund Strategies and Styles
    Overview of Hedge Fund Strategies and Styles (CFA Level 1): Key Characteristics of Hedge Fund Strategies, Major Hedge Fund Strategies, and Long/Short Equity. Key definitions, formulas, and exam tips.
  • Legal Structures, Lock-Ups, and Liquidity
    Legal Structures, Lock-Ups, and Liquidity (CFA Level 1): Common Legal Structures, Limited Partnerships (Onshore), and Offshore Corporations. Key definitions, formulas, and exam tips.
  • Operational Due Diligence and Manager Selection
    Operational Due Diligence and Manager Selection (CFA Level 1): Why Operational Due Diligence Matters and Differentiating Investment Due Diligence from Operational Due Diligence. Key definitions, formulas, and exam tips.
  • Evaluating Performance, Skill, and Benchmarking
    Evaluating Performance, Skill, and Benchmarking (CFA Level 1): Key Challenges in Hedge Fund Performance Evaluation, Benchmarks for Hedge Funds, and Distinguishing Alpha from Beta. Key definitions, formulas, and exam tips.
  • Prime Brokerage and Counterparty Risk
    Prime Brokerage and Counterparty Risk (CFA Level 1): Understanding the Role of Prime Brokers, Leverage and Margin Financing, and Securities Lending and Short-Selling. Key definitions, formulas, and exam tips.
  • Risk Parity Strategies and Multi-Strategy Funds
    Risk Parity Strategies and Multi-Strategy Funds (CFA Level 1): Foundations of Risk Parity, Mathematical Representation of Risk Parity, and Why It Matters. Key definitions, formulas, and exam tips.
  • Market Microstructure and High-Frequency Trading
    Market Microstructure and High-Frequency Trading (CFA Level 1): Price Formation and Order Execution, Role of Market Makers, and High-Frequency Trading. Key definitions, formulas, and exam tips.
  • Behavioral Biases in Hedge Fund Management
    Behavioral Biases in Hedge Fund Management (CFA Level 1): Behavioral Finance in Hedge Fund Settings, Common Behavioral Biases in Hedge Fund Management, and Overconfidence Bias. Key definitions, formulas, and exam tips.
  • Volatility and Tail-Risk Management Strategies
    Volatility and Tail-Risk Management Strategies (CFA Level 1): Understanding Tail Risk, Key Tools for Tail-Risk Hedging, and Out-of-the-Money Put Options. Key definitions, formulas, and exam tips.
  • Factor-Based and Alternative Beta Approaches
    Factor-Based and Alternative Beta Approaches (CFA Level 1): Traditional Beta vs. Alternative Beta, Smart Beta in a Nutshell, and Alternative Beta and Hedge Funds. Key definitions, formulas, and exam tips.
  • Event-Linked Instruments and Reinsurance Securitizations
    Event-Linked Instruments and Reinsurance Securitizations (CFA Level 1): Defining Event-Linked Instruments, Key Triggers for CAT Bonds, and Reinsurance Securitizations and Their Role in Hedge Funds. Key definitions, formulas, and exam tips.
  • Constraint and Thematic Hedge Fund Mandates
    Constraint and Thematic Hedge Fund Mandates (CFA Level 1): Understanding Constraints in Hedge Funds, Why Constraints Emerge, and Style Drift Risk. Key definitions, formulas, and exam tips.
  • Technology Infrastructure and Quantitative Tools
    Technology Infrastructure and Quantitative Tools (CFA Level 1): Building the Foundation: Technology Infrastructure in Hedge Funds and Significance of Robust Systems. Key definitions, formulas, and exam tips.
  • Tax-Efficient Offshore Domiciles
    Tax-Efficient Offshore Domiciles (CFA Level 1): Background and Rationale for Offshore Domiciles, Common Offshore Domiciles for Hedge Funds, and Master-Feeder Structures. Key definitions, formulas, and exam tips.
  • Interpreting Regulatory Filings and Reports
    Interpreting Regulatory Filings and Reports (CFA Level 1): Key Regulatory Filings, Form PF (Private Fund), and Annex IV (AIFMD). Key definitions, formulas, and exam tips.
  • Succession Planning and Fund Lifecycle Management
    Succession Planning and Fund Lifecycle Management (CFA Level 1): Significance of Succession Planning in Hedge Funds, What Is Succession Planning?, and Understanding the Hedge Fund Lifecycle. Key definitions, formulas, and exam tips.

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