CSC Exam 2 Questions and Answers Updated 2026

CSC Exam 2 Questions and Answers
Updated 2026
WhatMtremendousMflexibilityMinMtheMtypesMofMinvestmentMstrategiesMheMorMsheMcanMe
mploy,MtheirMabilityMtoMselectMsuperiorMinvestmentsMwithinMtheMtargetedMstrategyMand
MrelevantMmarketsMisMmoreMimportantMforMwhichMfundsMthanMforMalmostManyMotherM
managedMproduct.M-MAnswerMHedgeMFund



WhatMareMtheMthreeMcommonMprospectusMexceptionsMforMHudgeMfunds?M-
MAnswerM•MMinimumMinvestmentMexemption

M•MAccreditedMinvestorMexemption

•MOfferingMmemorandumMexemption.



WhatMeMminimumMinvestmentMexemptionMallowsMtheMsaleMofMsecuritiesMwithoutMaMpr
ospectusMtoMnon-individualMinvestorsMwhoMmakeMaMprescribedMminimumMinvestment?M-
MAnswerMNationalMInstrumentM45-106M(NIM45-
106)MsetsMthisMminimumMatM$150,000MacrossMallMjurisdictionsMinMCanada



WhatMisMtheMcriteriaMforMqualificationMasMaccreditedMinvestorsMbyMinstitutionalMclient?M
-MAnswerMnetMassetsMofMatMleastM$5Mmillion



WhatMisMtheMcriteriaMforMqualificationMasMaccreditedMinvestorsMbyMIndividualMclient?M-
MAnswerM-
MindividualMwho,MeitherMaloneMorMwithMaMspouse,MbeneficiallyMownsMfinancialMassetsM
withManMaggregateMrealizableMvalueMthatMexceedsM$1Mmillion

-
MAnMindividualMwhoseMnetMincomeMbeforeMtaxesMexceededM$200,000MinMtheMpastMtw
oMyearsM(M$300,000MifMtheirMisMaMspouse)

-
MindividualMwho,MaloneMorMwithMaMspouse,MhasMnetMassetsMworthMatMleastM$5Mmillio
n



WhatMensuresMthatMaMfundMmanagerMisMpaidManMincentiveMfeeMonlyMonMnetMnewMpr
ofits.MBasically,MaMhigh-
waterMmarkMsetsMaMbarMaboveMwhichMtheMmanagerMearnsMincentiveMfees.MThisMfeatur
eMpreventsMtheMmanagerMfromMdouble-
dippingMonMincentiveMfeesMfollowingMperiodsMofMpoorMperformance?M-MAnswerMHigh-
waterMmark

, WhatMisMtheMrateMaMhedgeMfundMmustMearnMbeforeMitsMmanagerMisMpaidManMincenti
veMfee?M-MAnswerMHurdleMrate



AMfundMhasMaMhurdleMrateMofM5%,MandMtheMfundMearnsM20%MforMtheMyear.MWhatM
willMtheMincentiveMfeesMwillMbeMbasedMon?M-MAnswerM15%



WhatMfollowMaMprescribedMformMandMprovideMforMtheMrightsMofMrescissionMorMaMrigh
tMofMaction,MifMtheseMareMnotMavailableMbyMregulation.MIncludedMinMtheMexpectedMpr
escribedMdisclosureMisMinformationMregardingMtheMissuerMandMauditedMfinancialMstateme
nts.M-MAnswerMofferingMmemorandum



WhatMriskMstemsMfromMtheMfactMthatMalternativeMstrategyMfundsMcanMbeMsmall,Mnewly
McreatedMbusinessesMthatMdependMonMoneMorMmoreMhigh-
profileMmanagersMforMtheirMsuccess?M-MAnswerMOperationalMRisk



WhatMisMtheMriskMthatMprofileMmanagersMlackMtheMorganizationalMdepth,MmanagerialMta
lent,MandMstrategicMplanningMcapabilitiesMnecessaryMtoMensureMgrowth,MorMevenMsurviva
l.MForMmostMalternativeMstrategyMfunds,MoperationalMriskMstemsMfromMpotentialMsystem
Mfailures,MasMwellMasMfaultyMsettlement,Mreporting,MandMaccountingMprocedures.M-
MAnswerMOperationalMrisk



WhatMareMassetMclassesMthatMareMdifferentMfromMtheMtraditionalMthreeMbroadMassetMc
lassesMofMequities,Mbonds,MandMcash?M-MAnswerMAlternativeMinvestments



WhatMareMtheMthreeMcategoriesMofMalternativeMinvestments?M-
MAnswerM•MalternativeMstrategyMfunds

•MalternativeMassets

•MprivateMequity



WhatMstrategiesMattemptMtoMprofitMbyMexploitingMdiscrepanciesMinMtheMpricingMofMrelat
edMstocks,Mbonds,MorMderivative?M-MAnswerMRelativeMValue



WhatMstrategiesMmaintainMpositionsMinMcompaniesMcurrentlyMorMprospectivelyMinvolvedMi
nMcorporateMtransactionsMincludingMmergers,Mconsolidations,Mrestructurings,MtenderMoffers
,MshareholderMbuybacks,MandMotherMcapitalMadjustments?M-MAnswerMEvent-Driven