Accredited Wealth Management Advisor Practice Exam

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Prepare for the Accredited Wealth Management Advisor Exam. Study with multiple choice questions, flashcards, and in-depth explanations to enhance your readiness. Achieve your certification with confidence!

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Which type of hedge fund focuses primarily on corporate governance?

Activist
Equity market-neutral
Relative value arbitrage
Event-driven

The correct answer is: Activist

The type of hedge fund that focuses primarily on corporate governance is the activist hedge fund. Activist hedge funds invest in companies with the intention of influencing management and driving changes that they believe will enhance shareholder value. This often involves acquiring significant stakes in a company and then pushing for specific operational or structural changes, such as changes in leadership, strategic initiatives, or capital structure. Activist investors typically engage in campaigns to advocate for their proposed changes, using their influence to affect voting at shareholder meetings or initiating dialogues with management. Their goal is to unlock value that they perceive is not being realized under the current governance structure. In contrast, equity market-neutral funds aim to eliminate market risk by holding long and short positions in equities while seeking to profit from relative price movements. Relative value arbitrage focuses on pricing inefficiencies between related financial instruments, and event-driven strategies capitalize on specific events that might affect the value of a stock, such as mergers or acquisitions. While these strategies may also consider governance factors, their primary focus is not on influencing corporate governance practices.