Study Question Bank
Self-test questions across 8 topic groups. Attempt each question before looking at the linked file. Mix of short-answer, explain-the-difference, and scenario questions.
No answers are provided here. Use the linked files to check your understanding.
Group 1 — Core Private Markets Mechanics
Q1. What is the illiquidity premium and what conditions must hold for it to exist? [→ ../concepts/illiquidity-premium.md]
Q2. A fund has a 10-year term with a 5-year investment period. Describe the state of committed capital at year 7 — what has been called, what remains, and what might be happening to distributions. [→ ../concepts/capital-commitments.md]
Q3. What is the difference between a capital call and a drawdown? Are they always the same thing? [→ ../concepts/drawdowns-and-distributions.md]
Q4. Draw and label the J-curve. Why do PE funds typically show negative returns in years 1–3? [→ ../concepts/j-curve.md]
Q5. A subscription line facility delays capital calls by 6 months. How does this affect the shape of the J-curve and the reported IRR? [→ ../concepts/j-curve.md]
Q6. Why does vintage year matter when comparing two funds both reporting 15% net IRR? What external factors might explain the gap? [→ ../concepts/vintage-year.md]
Q7. What is an unfunded commitment and why does it represent a planning risk for an LP managing a portfolio of funds? [→ ../concepts/capital-commitments.md]
Q8. How does diversification across vintage years reduce portfolio-level liquidity risk? [→ ../concepts/diversification.md]
Group 2 — Fund Structures and LP/GP Economics
Q9. What limits an LP’s liability in a limited partnership, and what actions could cause that protection to be lost? [→ ../fund-structures/limited-partnerships.md]
Q10. Name three decisions that typically require LPAC consent. What is the LPAC’s limitation — what can it not do? [→ ../fund-structures/gp-lp-roles.md]
Q11. Walk through the four steps of a European waterfall for a fund with £100m capital, 8% preferred return, GP catch-up, and 20% carried interest. [→ ../concepts/waterfalls.md]
Q12. What is the difference between a hard hurdle and a soft hurdle? Which is more favourable to the GP? [→ ../concepts/carried-interest.md]
Q13. How does recycling affect an LP’s DPI during the fund’s investment period? Why might a large LP dislike aggressive recycling provisions? [→ ../concepts/recycling-provisions.md]
Q14. Name two structural mechanisms that allow an open-ended fund to manage a spike in redemption requests. What is the trade-off for the investor? [→ ../fund-structures/open-ended-vs-closed-ended-funds.md]
Q15. What is a key-man provision and what typically happens when it is triggered? [→ ../fund-structures/limited-partnerships.md]
Q16. What is a side letter? Give two examples of provisions a large LP might negotiate in one. [→ ../fund-structures/limited-partnerships.md]
Q17. What is the main economic difference between a fund-of-funds commitment and a co-investment in the same deal? [→ ../fund-structures/co-investments.md]
Group 3 — NAV, Valuation, and Reporting
Q18. What is the difference between GAV and NAV? Give an example involving fund-level debt of £20m. [→ ../concepts/nav.md]
Q19. Classify the following into Level 1, 2, or 3: (a) a listed equity holding, (b) a leveraged loan with observable credit spreads, (c) a PE fund’s stake in an unquoted company. [→ ../risk/valuation-risk.md]
Q20. What incentives might lead a GP to delay recognising a markdown on a portfolio company? [→ ../risk/valuation-risk.md]
Q21. What is the difference between an Estimated NAV and a Final NAV? Give one scenario where the gap between them matters operationally. [→ ../concepts/nav.md]
Q22. Who calculates NAV in a typical private fund? What independent check exists, and what are its limits? [→ ../operations/nav-production.md]
Q23. What is return smoothing in the context of private asset valuations, and why does it occur? [→ ../risk/valuation-risk.md]
Q24. A fund’s RVPI is 0.8×. What does that tell you? What additional information would you need to determine whether this is reassuring or concerning? [→ ../metrics/rvpi.md]
Q25. What are the main components of a quarterly LP report? Name one thing that is typically not included. [→ ../operations/investor-reporting.md]
Group 4 — Performance Metrics
Q26. A fund returns £2.4m on £1m invested over 5 years. Calculate the MOIC. Estimate the approximate IRR. [→ ../metrics/moic.md]
Q27. Fund A: TVPI 2.0×, DPI 0.2×. Fund B: TVPI 1.6×, DPI 1.5×. An LP needs cash distributions. Which fund has performed better for this LP and why? [→ ../metrics/dpi.md]
Q28. What is the difference between gross IRR and net IRR? Name the three items that account for the gap. [→ ../metrics/irr.md]
Q29. How does a 6-month subscription line facility affect the timing of cash flows and the reported IRR? Why does this not affect MOIC? [→ ../metrics/irr.md]
Q30. A fund reports 18% net IRR. Its PME is 0.92×. What does the PME tell you that the IRR does not? [→ ../metrics/public-market-equivalent.md]
Q31. A fund is 4 years into a 10-year term. TVPI = 1.3×, DPI = 0.0×. Is this unusual? What does it suggest about the state of the portfolio? [→ ../metrics/tvpi.md]
Q32. Why does RVPI tend to decrease as a fund matures, even without losses or markdowns? [→ ../metrics/rvpi.md]
Q33. Why might MOIC be a more useful comparison metric than IRR when comparing a 3-year deal to a 7-year deal? [→ ../metrics/moic.md]
Group 5 — Liquidity, Leverage, and Concentration Risk
Q34. A PE buyout acquires a company for £120m: £50m equity, £70m debt. Enterprise value falls 30%. What is the equity return in £ and as a percentage loss? [→ ../risk/leverage-risk.md]
Q35. What is overcommitment risk and what market conditions make it most dangerous? [→ ../risk/liquidity-risk.md]
Q36. Name four distinct dimensions of concentration risk an LP with a portfolio of 15 alternative funds should monitor. [→ ../risk/concentration-risk.md]
Q37. What is “hidden concentration” in an alternatives portfolio? Give a concrete example of how it could arise. [→ ../risk/concentration-risk.md]
Q38. What is the difference between asset-level leverage, fund-level leverage, and subscription line leverage? Which affects LP NAV directly and immediately? [→ ../risk/leverage-risk.md]
Q39. An open-ended real estate fund receives redemption requests totalling 25% of NAV in one quarter. Walk through the mechanisms available to the fund manager. [→ ../risk/liquidity-risk.md]
Q40. Why might a fund-of-funds investor have more concentrated vintage-year exposure than the number of underlying funds suggests? [→ ../risk/concentration-risk.md]
Group 6 — Hedge Funds and Private Credit
Q41. What is PIK interest? How does it affect a private credit fund’s reported NAV and income, and what risk does it mask? [→ ../asset-classes/private-credit.md]
Q42. A hedge fund loses 20% in year 1 and gains 15% in year 2. Explain how the high water mark affects performance fee calculation in year 2. [→ ../asset-classes/hedge-funds.md]
Q43. What is the difference between senior secured debt, mezzanine, and subordinated debt in a private credit capital stack? How does this affect loss severity? [→ ../asset-classes/private-credit.md]
Q44. What are gates and side pockets in an open-ended hedge fund? How do they interact during a period of market stress? [→ ../asset-classes/hedge-funds.md]
Q45. What is equalisation in a closed-ended fund context, and what two costs does a late-close LP typically bear? [→ ../concepts/equalisation.md]
Q46. What is a lock-up period in a hedge fund and why is it structurally important? [→ ../asset-classes/hedge-funds.md]
Q47. A private credit fund has 45% of its portfolio in PIK loans. Its reported NAV has grown steadily for 3 years with no cash income received. What risk management question should be asked? [→ ../asset-classes/private-credit.md]
Q48. What is series accounting in the context of an open-ended performance fee? How does it address the equalisation problem? [→ ../concepts/equalisation.md]
Group 7 — Operations, Onboarding, and Subscriptions
Q49. What is the difference between CDD and EDD in investor KYC? Name two triggers for EDD. [→ ../operations/onboarding-and-kyc.md]
Q50. What is a UBO and why must one be identified for every corporate investing entity? What happens if ownership is layered through multiple holding companies? [→ ../operations/onboarding-and-kyc.md]
Q51. Walk through the four main stages of a closed-ended fund subscription. What must be complete before any money moves? [→ ../operations/subscriptions.md]
Q52. What is the difference between a recallable and a non-recallable distribution? Describe a scenario where the distinction matters. [→ ../operations/distributions.md]
Q53. Management fees are typically charged on committed capital during the investment period and on invested capital thereafter. Why does this convention exist from the GP’s perspective? [→ ../operations/fee-calculations.md]
Q54. What triggers a capital call? What information must a capital call notice contain? [→ ../operations/capital-calls.md]
Q55. Why is data management particularly challenging in alternatives compared to public fund administration? Name two specific challenges. [→ ../operations/data-management.md]
Q56. What is subscription line bridging? How does it affect LP cash flow timing and capital planning? [→ ../operations/capital-calls.md]
Group 8 — Source-Backed Review
Q57. Which international standard defines the Level 1/2/3 fair value hierarchy for IFRS reporters? What does Level 3 mean in practice for a PE fund? [→ ../sources/ifrs-13-fair-value.md]
Q58. What is the difference between ILPA Templates and ILPA Principles? Which covers reporting format and which covers governance? [→ ../sources/ilpa-templates.md]
Q59. For a US-domiciled fund, which accounting standard governs fair value measurement? How does ASU 2022-03 change the treatment of contractual sale restrictions? [→ ../sources/asc-820-fair-value.md]
Q60. What does IPEV recommend as the primary approach to fair valuing a private company when there is no recent observable transaction? [→ ../sources/ipev-valuation-guidelines.md]
Q61. What is AIMA’s DDQ framework? Who uses it and at what point in the investment process? [→ ../sources/aima-ddqs.md]
Q62. What does “comply or explain” mean in the context of the SBAI Standards? Give an example of when a manager might explain rather than comply. [→ ../sources/sbai-standards.md]
Q63. What are FATF’s 40 Recommendations? Which ones are most directly relevant to fund investor onboarding? [→ ../sources/fatf-recommendations.md]
Q64. For a European non-listed real estate vehicle, which two public sources define NAV calculation and investor reporting standards? What does each cover? [→ ../sources/inrev-guidelines.md]