Sample interview questions: How do you assess the liquidity of different alternative investment strategies, such as long/short equity?
Sample answer:
Assessing Liquidity of Alternative Investment Strategies
Long/Short Equity
- Market impact: Estimate the potential trading costs associated with executing large orders, considering factors such as market depth, bid-ask spreads, and historical turnover.
- Trading volume: Evaluate historical and projected trading volume to gauge the ease of buying or selling positions quickly.
- Redemption terms: Review the fund’s redemption notice period and minimum redemption size, which can impact liquidity in periods of market volatility.
- Collateral requirements: Assess the level of collateral required to maintain positions, as it can affect the flexibility to liquidate assets if needed.
- Leverage: Consider the strategy’s leverage ratio and how it may amplify exposure to liquidity risks during market downturns.
Other Considerations
- Portfolio composition: Diversification across different asset classes, industries, and geogra… Read full answer