Caia Level 1

Loyalty Additional Compensation Arragements Responsibility of Supervisors

Diligence and Reasonable Basis Communication with Clients and Prospective Clients Record Retention

Disclosure of Conflicts Priority of Transactions Referral Fees

Conduct as Members and Candidates in the CFA Program Reference to CFA Institute, the CFA Designation, and the CFA Program

Traditional investments include long positions in equities, fixed income, and cash

Real assets Hedge funds Commodities Private Equity (including mezzanine and distressed debt) Structured Products (including credit derivatives)

real assets focuses on investments in which the underlying assets involve direct ownership of nonfinancial assets

Timberland, raw land and farmland

Hedge funds are less regulated than trad. Investments

Venture capital Leveraged buyouts Mezzanine debt Distressed debt

Private equity includes both equity and debt positions that, among other things, are not publicly traded

debt and equity securities

Collateralized debt obligations CDOs Credit derivatives

Regulatory structures Securities structures Trading structures Compensations structures Institutional structures

Regulatory structure refers to the role of government, including both regulation and taxation, in influecing the nature of an investment

Securities structure refers to the structuring of cash flows through securitization. Securitization is the process of transforming asset ownership into tradeable units

Trading structure refers to the role of an investment vehicle's investment managers in developing and implementing trading strategies

Conpensation structure refers to the ways that organizational issues, especially compensation schemes, influence particular investments

Institutional structures refers to the financial markets and financial institutions related to a particular investment, such as whether the investment is publicly traded

real assets: institutional structure hedge fund: trading structure commodities: securitirs structure private equity: institutional structure structured products: securities structure

Illiquidity means that the investment trades infrequently / with low volume and that returns are difficult to observe due to lack of trading

risk: illiquid assets can be difficult to sell advantage: higher returns

efficiency refers to the tendency or 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

competition are less transaction costs are higher

securities structures and trading structures

They are not bell -shaped

Return computation methodologies for alternative investments are driven by their structures and can include concepts such as IRR. They also may take into account the effects of leverage.

Alternatie investments typically require familiarity statistical methods designed for nonnormality

active and rapide trading challenges impossed by the inability to observe transaction -based prices unique cash flow forecasting challenges

techniques designed to address returns of nonnormality (skewness, kurtosis) and barriers to continuous portfolio adjustments and liquidity management

Active management refers to efforts of buying and selling securities to earn superior combinations of risk and returns

Passive investing tends to focus on buying and holding securities in an effort to match the risk and return of a target

Active risk: risk that causes a portfolio's return to deviate from a benchmark due to active management Active return: difference between the return of a portfolio and its benchmark due to active management

An absolute returns standard means that returns are evaluated relative to zero. A relative return standard means that returns are evaluated relative to a benchmark