About Course
We have, so far, studied the traditional investment options such as equity, fixed-income investments, commodities, real estate, etc. Apart from these traditional investments, there are many alternative investments as well, such as REITs, hedge funds, private equity, etc. These also offer good opportunities for returns, depending upon the degree of risk involved. These investments can be a good source of diversification to the portfolio.
In this chapter, we discuss in brief different forms of alternative investments, their costs and benefits, the risk and returns available on them, and how they help in building the desired portfolio, etc.
This chapter is covered by Reading 58, study session 19 of the study material covered by the institute. After reading this chapter a student should be able to:
a. compare alternative investments with traditional investments;
b. describe categories of alternative investments;
c. describe potential benefits of alternative investments in the context of portfolio management;
d. describe hedge funds, private equity, real estate, commodities, infrastructure, and other alternative investments, including, as applicable, strategies, subcategories, potential benefits and risks, fee structures, and due diligence;
e. describe, calculate, and interpret management and incentive fees and net-of-fees returns to hedge funds;
f. describe issues in valuing and calculating returns on hedge funds, private equity, real estate, commodities, and infrastructure;
g. describe risk management of alternative investments.