Hello there, i am reading the question and i cannot understand how the scheme is set up. The inv manager has some funds invested in a HFF? Also what does the “passing in on to the fund’s investors” mean?
Hi, I cant find any reference to what you discuss here in the question. Have you got the wrong exam question in the text?
Ahh I thought you were using the examiners past paper solutions. the revision booklets have a term "passing it on" which refers to the fact that the hedge fund could restrict the ability of the investors to sell the hedge fund units. This mitigates the problem that the hedge fund has if investors sell units but the hedge fund cannot sell the underlying assets. There is no reference to a "scheme" though. There are three investments and the first is a hedge fund. This may be what you are referring to (if not let me know). The exam question states that it "focuses on illiquidity strategies". the financial risk the examiner was looking for was liquidity risk, which is the risk when you invest in assets that you cannot sell easily.