CAIA: Chapter 1 What is an Alternative Investment
What is an Alternative Investment
What is an Alternative Investment
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Lernkarten
Securitization..
..is the process of transforming asset ownership into tradable units. The use of securities and security structuring transforms asset ownership into potentially distinct and diverse tradable investment opportunities.
Trading structure..
refers to the role of an investment vehicle's investment managers in developing and implementing trading strategies .
Compensation structure
refers to the ways that organizational issues, especially compensation schemes, influence particular investments.
Instituional structure
refers to the financial markets and financial institutions related to a particular investment, such as whether the investment is publicly traded.
diversifiers
alternative investments are often synonymous with diversifiers
Absolute return products
investment products viewed as having little or no return colleration with traditional assets are also often termed absolute return products since their returns should generally be analyzed on an absolute basis rather than relativ to returns of traditional
Illiquidity
means that the investment trades infrequently and/or with low volume (thinly). Illiquidity means that returns are difficult to observe due to the lack of trading and that realized returns may be affected by the trading decisions of a few paricipants.
Lumpy Assets
..are assets that can only be bought and sold in specific quantities, such as large real estate projects
Efficiency
refers to the tendency of market prices to reflect all available information
Inefficiency...
...refers to the deviation of actual valuations from those valuations that would be anticipated in an efficient market.
Nonnormality
the returns of many alternative investments are structured so that they are infrequently traded, and therefore their market returns are measured over longer time intervals.
Active management
refers to efforts of buying and selling securities to earn superior combinations of risk and return. Alternative investment analysis typically focuses on evauation acitive managers and their systems of active management, (most alt. investments =actively m
Passive investing
tends to focus on buying and holding securites in an effort to match the risk and return of a target such as highly diversified index
benchmark return
the returns o fthe fund would typically be comprared to the benchmark return, which is the return of the benchmark index or benchmark portfolio
Active return
is the difference between the return of a portfolio and its benchmark that is due to active management
Absolute return standard
means that returns are to be evaluated realtive to zer - or relative to the riskless rate
relative return standard
means that returns are to be evaluated relative to a benchmark
Arbitrage
the term is often used to represent efforts to earn superior returns even when risk is not eliminated acuase the long and short positions are not in identical assets or are not held over the same time interval
Return Enhancer
If the primary objective of including an investment product in a portfolio is the superior average returns that it is believed to offer, then the product is often reffered to as a return enhancer.
Return diversifier
If the primary objective of including an investment product in a portfolio is for the reduction in the portfolio's risk that is believed to offer through its lack of correlation with the portfolio's assets, then that product is often referred to return di
