Alternative Investments Overview, Fund Structures, and Fees

Free CAIA Level I lesson in Introduction to Alternative Investments. 43 min read, ~6,432 words.

CAIA classifies four alternative categories (Real Assets, Hedge Funds, Private Equity, Private Credit). Structured products and CDOs live inside private credit, not as a fifth category. Alternatives share four frictions (illiquidity, opacity, weak regulation, complex structures) and three return characteristics (illiquidity, inefficiency, non-normality), the last sourced from securities and trading...

What this lesson covers

• Content
• Example 1
• Example 2
• Common Mistakes
• Check Your Understanding
• Exam Shortcuts

Learning objectives

• defining alts
• blurred lines
• history us
• history asia
• risk return characteristics
• goals
• buy sell side
• service providers
• legal structures
• fund types
• fund features
• fund terms
• drawdown fees
• waterfall calcs
• hedge fund fees
• fees and behavior
• return math
• irr
• irr problems
• modified irr
• other measures
• j curve
• notional principal
• return distributions
• moments
• covariance correlation
• beta autocorrelation
• std dev variance
• normality testing
• market efficiency
• time value
• forward rates
• arbitrage
• binomial trees
• single factor models
• hypothesis testing
• sampling problems
• forwards vs futures
• forward foundations
• forwards on rates
• carry forwards
• managing long short
• option exposures
• rate options
• rate swaps
• option pricing
• risk measures
• var
• benchmarking
• ratio measures
• risk adjusted
• pricing data
• appraisals smoothing
• alpha beta overview
• estimating alpha
• return attribution
• statistical issues

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