SIE practice questionhardHedge Funds
Which of the following best describes the liquidity risk of hedge funds?
- AInvestors may be required to commit funds for several years before redemption is allowed✓ Correct answer
- BShares are redeemable daily at NAV
- CHedge funds are traded on major stock exchanges
- DWithdrawals can always be made at any time with no penalty
Explanation
Why A — Investors may be required to commit funds for several years before redemption is allowed
A is correct; hedge funds are illiquid, often requiring long lock-up periods. B and C are mutual fund and ETF features. D is false—redemptions are typically restricted.
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