CFA® Level I Exam Alternative Investments Practice Questions

Alternative Investments is 6–9% of the CFA® Level I exam under the 2027 curriculum (7–10% under 2026). Practice original questions on fund structures, fee calculations, private capital, real assets, hedge funds and digital assets.

Take the full timed Level I mock exam

180 three-choice questions in two timed sessions of 135 minutes, weighted like the real exam, with a score by topic and the full working for every answer. 13 of the 180 questions are alternative investments.

Or try the free alternatives drill
  • 46 original alternative investments questions with worked answers
  • 6–9% of the exam under the 2027 curriculum, session 2
  • 13 of the 180 questions in our full mock
Free sample · Question 1 of 3Alternative Investments

A hedge fund database lets managers start reporting whenever they choose and then adds their earlier track records to the database. Most managers join only after a period of strong results. The bias this introduces into index returns is best described as:

What our alternative investments questions cover

  • Investment methods (fund, co-investment, direct) and fund structures; management and incentive fees, hurdles, catch-up, high-water marks and clawbacks
  • Performance measurement: IRR, multiples, appraisal smoothing and reporting biases
  • Private equity and private debt
  • Real estate (direct, REITs, valuation by capitalization rate) and infrastructure
  • Commodities and futures returns, contango and backwardation; farmland and timberland
  • Hedge fund strategies and risks; blockchain and digital assets
Line drawing of an apartment building, a wind turbine, gold bars, young trees on farmland and a distant bridge

This list is our own summary of the topic, written for practice. The official topic outline and learning outcomes are published by CFA Institute for registered candidates.

Drill alternative investments, then sit the full mock

Take the full timed Level I mock exam

180 three-choice questions in two timed sessions of 135 minutes, weighted like the real exam, with a score by topic and the full working for every answer. 13 of the 180 questions are alternative investments.

Or try the free alternatives drill

Ideas the questions test most

  1. Alternative investments tend to be less liquid, less transparent and harder to value than stocks and bonds, with higher fees and reporting that can smooth reported volatility.
  2. A high-water mark means the incentive fee is paid only on gains above the fund’s previous peak value.
  3. The value of an income property by direct capitalization is net operating income divided by the capitalization rate.
  4. In backwardation, futures prices are below the spot price and the roll yield is positive for a long position; in contango, roll yield is negative.
  5. A permissionless blockchain lets anyone join and validate; a permissioned one restricts who can participate.

Start the free alternative investments drill · Full Level I mock exam · Mixed drill

Common questions

How much of the CFA Level I exam is alternative investments?

Alternative Investments is 6–9% of the Level I exam under the 2027 curriculum, down from 7–10% under 2026. It is tested in session 2.

Are hedge fund fee calculations on Level I?

Yes. Expect management and incentive fee calculations with hurdle rates and high-water marks, and the effect of fees on investor returns. Our questions state every fee convention in the question.

Take the full timed Level I mock exam

180 three-choice questions in two timed sessions of 135 minutes, weighted like the real exam, with a score by topic and the full working for every answer. 13 of the 180 questions are alternative investments.

Or try the free alternatives drill

More Level I topics

Topic weights and exam format: CFA Institute: Level I exam (format and topic weights), checked November 2026.

Game Assessment Prep is an independent practice site. It is not affiliated with, endorsed by or a prep provider of CFA Institute, and CFA Institute does not endorse, promote or warrant the accuracy of these questions. Every question is original; none is taken from CFA Institute materials.

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