Course Content
Alternative Investments Vs. Traditional Investments
This topic is covered under LOS A of Reading 58
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LOS A
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LOS A
Categories of Alternative Investments
This topic is covered under LOS B of Reading 58
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LOS B
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LOS B
Benefits of Alternative Investments
This topic is covered under LOS C of reading 58, which requires you to 'describe potential benefits of alternative investments in the context of portfolio management'.
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LOS C
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LOS C
Hedge Funds, Private Equity, Real Estate, Commodities, Infrastructure, and Other Investment – Explained
This topic is covered under LOS D and E of Reading 50, which requires us to: a. 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; b. describe, calculate, and interpret management and incentive fees and net-of-fees returns to hedge funds; and c. describe issues in valuing and calculating returns on hedge funds, private equity, real estate, commodities, and infrastructure.
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Hedge Funds
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Private Equity
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Real Estate
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Commodities
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Infrastructure
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Others
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LOS D and E
Risk Management
This topic is covered under LOS G of Treading 58, which requires us to 'describe risk management of alternative investments'.
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LOS F
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LOS F
Alternative Investments – Question Bank
Some questions to test your level of preparation for the exam.
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Question Bank
Alternative Investments
About Lesson

LOS A Requires us to:

compare alternative investments with traditional investments

 

1.  Traditional investments mean putting the money in or holding long positions commonly used well-known assets such as stocks, bonds, cash, commodities, real estate, etc.

2.  The alternative investments, on the other hand, include all the other, i.e. non-traditional investments.

3.  The alternative investments are different from the traditional investments in terms of:

a.  Types of assets/securities held,

b.  The structure of investment vehicles in which these assets are held, as these investments make use of derivatives and leverages, short positions, illiquid investments, etc. They may also make use of traditional investments as well.

3.  The alternative investments usually have the following important features:

a.  These investments generally require active management, as these are somewhat specialized investment vehicles.

b.  Due to the requirement of active management, the alternative investments do require a higher fee and narrow manager specialization.

c.  The alternative investments require a higher amount of investment than the traditional investment options, thus there is a lower degree of diversification.

d.  There are generally restrictions on the redemption of these investment instruments.

e.  These investments usually have a low correlation with traditional investments.

f.   These investments are usually characterized by a low level of regulation and transparency.

g.  These investments have unique legal as well as tax considerations.

h.  They have limited risk-return data; the investment decisions are made using the estimates.

i.  The typical investors who invest in alternative investments are the high net worth investors or institutional investors.

 

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