Alternative Investments

Question 1

Alternative investments

Answer 1

a broad category of investment options that fall outside the traditional asset.

are typically less regulated, less liquid, and often involve a higher degree of risk

they can offer the potential for diversification and higher returns

Question 2

Types of Alternative investments

Answer 2

Hedge funds

Private Equity

Real Estate

Commodities

Venture Capital

Question 3

Venture Capital

Answer 3

involves investing in early-stage companies with high growth potential.

provide capital in exchange for an equity stake in the company.

VC firms raise capital from institutional and individual investors, then invest in startups that show promise for significant returns.

Question 4

Why consider Alternative investments

Answer 4

Diversification (protects against significant losses)

Potential for Higher Returns (private equity, VC, Hedge funds)

Hedge against Inflation (preserves purchasing power)

Long-Term Investment Opportunities

Access to Unique Opportunities (specialized markets)

Tailored Risk-Return Profiles (capital preservation/high growth)

Reduced Market Volatility (actively managing for market trends)

Question 5

Risks of Investing in Alternative Investments

Answer 5

Illiquidity (no access to your money)

Lack of Transparency (inv. in less regulated/opaque markets)

Higher Fees (management fees/expenses - less profitability)

Market and Sector Risk (e.g. real estate - fluncating property value)

Complexity and Due Diligence (needs professionals to understand)

Lack of Regulation (risk of fraud & unethical practices)

Manager Risk (depend on skills of professionals/managers)

Valuation Uncertainty (about inv. true worth)

Concentration Risk (if one asset underperforms, affects portfolio)

Performance Risk (similar to concentration risk)

Regulatory changes (impacts performance & attractiveness)