PBAM
This type of office manages the wealth of just one ultra-rich family.
Single (private) family office
Why do bond prices decline when interest rates rise?
Because higher yields make existing lower-coupon bonds less attractive.
What asset class involves privately negotiated lending outside public bond markets?
Private credit
This type of fiscal policy boosts demand through government spending and tax decisions.
Expansionary fiscal policy increases demand.
What core assumption of traditional finance does behavioral finance reject?
That investors are fully rational and utility-maximizing.
At roughly $14T, this firm is the world's largest asset manager.
BlackRock
What is credit risk?
Risk that a borrower will fail to repay its debt or meet interest payments.
In a private equity partnership, who manages the investments, and who supplies the investor capital?
General partners manage the investments; limited partners supply investor capital
This Federal Reserve publication summarizes economic conditions across districts using qualitative business data.
The Beige Book.
Summarizes labor conditions, pricing power, consumer demand, and credit trends.
What does loss aversion mean?
Because losses feel disproportionately painful, leading to panic selling or holding losing positions too long.
Asset management is described as similar to hedge funds in capital allocation. What structural differences limit asset managers from behaving like hedge funds?
They emphasize long-term return maximization with lower risk, greater transparency, and more liquid portfolios rather than aggressive leverage and short selling.
Which fixed-income instruments are affected by monetary policy?
Treasuries, corporate bonds, municipal bonds, high-yield bonds.
Name two differences between futures and forwards.
futures are exchange-traded rather than arranged OTC; futures are marked to market daily rather than exchanging money only at delivery; forwards are customized, while futures use standardized contracts
A flat yield curve represents this stage of the economic cycle.
A flat yield curve represents an economic transition.
How does recency bias amplify market cycles?
By causing investors to overweight recent performance and increase exposure near peaks.
Name two pooled vehicles asset managers run.
Mutual funds, ETFs, index funds, pensions, sovereign wealth funds
Why do rising credit spreads with falling Treasury yields signal credit risk, not interest rate risk?
Because Treasury yields falling show rates are easing, but rising credit spreads indicate investors see higher default or credit risk.
What hedge fund strategy is for buying a takeover target's shares while shorting the acquirer?
Merger arbitrage
What are the two objectives in the Federal Reserve’s dual mandate?
Maximum employment and price stability (inflation)
How can recency bias and herd behavior interact during market rallies to amplify mispricing and increase long-term portfolio risk?
Recency bias causes investors to overweight recent gains, while herd behavior drives them to follow the crowd, reinforcing momentum and contributing to asset bubbles that increase long-term portfolio risk.
Name the two tools hedge funds use freely that traditional asset managers mostly don't.
Short selling and leverage
Bond Market
A property’s annual NOI stays at $500,000. Its cap rate rises from 5% to 6.25%. What are its old and new values?
Old value: $10 million. New value: $8 million
property value = NOI ÷ cap rate
A company’s base case assumes stable operations. Name two realistic business changes that could justify a bear case.
weaker demand, weaker pricing, loss of market share, or a regulatory setback
Why is behavioral discipline often more important than asset selection in private banking, particularly during periods of volatility?
Because long-term underperformance often stems from predictable behavioral errors such as panic selling, buying high and selling low, chasing recent winners, and over concentration, meaning managing investor behavior is more critical to outcomes than selecting individual assets.