Question #7
Reading: Reading 34 Hedge Fund Strategies
PDF File: Reading 34 Hedge Fund Strategies.pdf
Page: 2
Status: Correct
Correct Answer: B
Question
Which of the following is a disadvantage of a multistrategy fund as opposed to a fund-of- funds?
Answer Choices:
A. Volatility of returns
B. Fee structure
C. Operational risk
Explanation
Since the funds in a multistrategy fund are operated by the same firm, any operational
flaws would not be diversified away as with a fund-of-funds. Fees are likely more attractive
for a multistrategy fund due to netting, and both types of funds would seek to limit
volatility.