Free CAIA Level II Universal Investment Considerations Practice Questions
Universal investment considerations carry 6-11% of CAIA Level II (CAIA Association). Questions cover how alternative investments are regulated in the United States, Europe, and Asia, geopolitical frameworks for private markets (geopolitical beta, the 3x3 framework), and sustainability across real assets, hedge funds, and private equity: ratings and scores, materiality and disclosure, the United Nations' role, fiduciary responsibilities, and market-based methods of addressing sustainability issues.
In sustainability investing, active ownership is best illustrated by:
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Correct Answer: C
Solution
C is correct. The curriculum links active ownership to engagement. PRI Principle 2 commits signatories to be active owners who incorporate sustainability issues into their ownership policies and practices. The review of sustainability investing evidence ties value creation by active owners to successful engagements with companies. Lesson 9.4.6 describes engagement as a shareholder opening a dialogue with a company on a specific sustainability agenda. That dialogue may be private and collaborative or public and combative, and in extreme cases the investor sponsors a proposal for a shareholder proxy vote. Investors take this active role because they believe one investor buying or selling a stock will not change the company's behavior. Rebalancing, return-seeking bets on activist funds, and screening followed by divestment do not involve the investor using its own voice as a shareholder.
Question 2
Medium
What is the primary function of Open Protocol in hedge fund transparency?
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Correct Answer: B
Solution
B is correct. Open Protocol establishes shared conventions for risk information, calculation methods, and reporting practices, helping investors compare and monitor hedge fund exposures. It accommodates investors' information needs while preserving confidentiality around detailed portfolio allocations.
Question 3
Hard
Cedar Vale Partners is constructing a 3x3 diagram of the geopolitical and political future. What should each cell in the diagram represent?
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Correct Answer: B
Solution
B is correct. The diagram places laissez-faire, dirigisme, and populism along one dimension and unipolarity, bipolarity, and multipolarity along the other. Each intersection defines a joint scenario for which investors can assess growth and inflation implications.
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