Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

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What constitutes a qualified majority in decision-making among Limited Partners (LPs)?

More than 50% of LPs voting
More than 75% of LPs voting
Less than 50% of LPs voting
Exact majority of LPs voting

The correct answer is: More than 75% of LPs voting

A qualified majority in decision-making among Limited Partners (LPs) typically requires a higher threshold than a simple majority to ensure that significant decisions reflect broad support among the investing partners. The correct answer—a requirement of more than 75% of LPs voting—ensures that the collective interests and opinions of a substantial portion of the LPs are taken into account, minimizing the possibility that a small group can dominate significant decisions. This higher voting threshold is often necessary for critical decisions that may involve changes in fund structure, amendments to the limited partnership agreement, or other strategic shifts that could impact all partners significantly. By requiring more than 75% agreement, it provides a mechanism to protect the interests of all investors, ensuring that major changes align closely with the overall consensus of the partnership, thus fostering a sense of collaboration and commitment among LPs. In contrast, a simple majority (more than 50%) might allow decisions to be made with minimal support, possibly leading to dissatisfaction among a larger group of LPs. Less than 50% voting or an exact majority do not reflect the consensus needed for crucial partnership decisions.