What is an alternative investment?
(Reading 2.1 – What is an Alternative Investment?)
Not a traditional investment like stocks or bonds
Often involves non-public or illiquid assets
Includes things like real estate, hedge funds, private equity
What are the main types of alternative investments?
Real assets (e.g., real estate, timber, commodities)
Hedge funds
Private equity
Private debt
Structured products
How do real assets differ from financial assets?
Real assets are physical things (like land or commodities)
Financial assets are paper claims (like stocks and bonds)
Real assets can protect against inflation
What are examples of hybrid investments?
Publicly traded real estate (REITs)
Liquid alternatives (mutual funds with hedge fund strategies)
Business development companies (BDCs)
How has the definition of institutional investments changed?
Used to mean low-risk, income-focused assets
Now includes private equity, hedge funds, and real assets
Shift driven by regulation and market evolution
What methods are needed to analyze alternative investments?
Return computation (IRR, time-weighted, etc.)
Statistical analysis (e.g., skewness, kurtosis)
Valuation methods (DCF, comparables)
Portfolio methods (e.g., optimization with illiquidity)
Why do alternative investments require special analysis?
They are often illiquid
Market prices may be inefficient
Returns may not be normally distributed
Information can be limited or private
What is the goal of alternative investments?
Achieve higher returns (alpha)
Manage risk better
Exploit inefficiencies (e.g., arbitrage)
Diversify the portfolio
Avoid outdated strategies
What’s the difference between absolute and relative return?
Absolute return: Compared to the risk-free rate
Relative return: Compared to a benchmark index
Alternative investments often aim for absolute return
What is arbitrage in alternative investing?
Takes advantage of price differences
Involves buying and selling similar assets
Pure arbitrage is risk-free
Most arbitrage includes some risk
What does the 2x2 framework show?
Enhanced return + public = Hedge Funds
Enhanced return + private = Private Equity
Risk control + public = Real Assets
Risk control + private = Private Credit or Real Assets
Who are the main buy-side participants in alternatives?
(Reading 2.2 – Environment of Alternative Investments)
Pension plans
Endowments and foundations
Family offices
Sovereign wealth funds
What structures are used for alternative investments?
Private limited partnerships
Hedge fund platforms
Master limited partnerships (MLPs)
Separately Managed Accounts (SMAs)
Mutual funds (’40 Act) and UCITS funds
Who are the main sell-side participants?
Large investment banks
Brokers and dealers
Front office: investment and client work
Middle office: risk and compliance
Back office: operations and systems
Which outside service providers do funds use?
Prime brokers
Accountants and auditors
Legal counsel
Fund administrators (NAV, P&L, investor statements)
Zuletzt geändertvor 8 Tagen