Alternative Investment & Private Market Flashcards
What is the role of alternative assets?
Provides diversity to conventional assets
What are examples of alternative assets?
Hedge funds, commodities, private credit and cryptocurrencies.
What are traded on commodity markets?
Raw or primary products including energy, metal, grains and soft.
How can you invest in the commodity market?
Physically purchasing a commodity, through equities that comprise a substantial commodity activity , through futures contracts on the commodities, or through collective investments such as ETF’s and ETC’s
How are commodity futures historically correlated to equities & bonds and inflation?
Negatively correlated to equites & bonds and positively correlated to inflation. Hence maybe held as inflation hedge and offer useful portfolio diversification
What indices are constructed to measure commodity price movements?
Refinitiv/ core commodity CRB index, Bloomberg commodity index, rogers international commodity index
What is the correlation between conventional asset classes and alternative asset classes?
Generally low correlation and considered to be useful risk diversifiers however usually comes at a cost in terms reduced liquidity
What is cryptocurrency?
New asset class often associated with bitcoin and blockchain technology.
What are the differences between cryptocurrency and fiat currencies?
Differences are extensive and include an upper limit on supply, ease of transacting and security of ownership.
How many coins are estimated to be under the generic ‘alt coins’?
5,000 coins.
How do cryptocurrencies behave?
Role of cryptocurrencies still under investigation but seem to behave very differently from conventional assets and returns are driven by crypto-specific influences such as momentum.
What does direct investment in property generally involve?
Purchase of freehold or lease hold interest in land or buildings.
What does indirect property investment involve?
Purchasing property bonds, ordinary shares in property company ar REIT.
What are the characteristics of commercial property?
In general to offer secure a stable cash flow, low volatility and diversification benefits.
What does the MSCI investment property databank do?
Provides a standard benchmark for property investors.it is not based a transaction data but on records from portfolio valuations.
What does the MSCI IPD indices look at?
Constructs total return indices for different types of property for a number of countries, exclude the impact of debt, fees and taxes.
What are real estate derivatives?
Financial instruments that give investors a return that reflects performance of direct property market. Some are based on MSCI PD indices.
What are the risks of investing directly in property?
Location or physical characteristics of a building, credit quality of tenants, length of lease and its break options.land and other tax charges, rental growth,and sector differentials and overall market yield changes.
What are the rites of investing in a collective property product?
Illiquid as direct property investments are difficult to sell, concentration funds that invest primarily in property are subject to risk of loss it property market downturn. Price volatility risk for investment vehicles that are listed, also gearing is a risk for property investors.
What are the three approaches to valuing property?
Cost approach, sales comparison method and the income approach.
What is responsible investment?
Investment approach based on view that effective management of environmental, social, and governance issues (ESG) not only the right thing to do but creates value for investors.
What is a hedge fund?
Collective investment vehicle distinguished by short selling, leverage or use of derivative instruments.
What are the characteristics of a hedge fund?
Relatively illiquid and opaque in structure. Often seek positive returns regardless of market circumstances. Strategies forinvesting include market neutral, event driven, long/short and tactical strategies
What are the types of unlisted and not traded on an exchange assets?
Real estate, infrastructure, private credit, and private equity.
