Alternative Investments Flashcards
1
Q
Common Characteristics of Alternative Investments
A
- illiquidity
- narrow manager specialization
- low correlation with traditional investments
- low level of regulation and less transparency
- limited and potentially problematic historical risk and return data
- unique legal and tax considerations
2
Q
Key Historical Returns and Volatilities
A
20 year period ending 2009:
- mena returns of HF, RE, PE, VC exceeded mean returns of global stocks and bonds. Ave. std of all but HF exceeded ave std of global stocks and bonds
- HF higher average return, lower std
- Commodities lowest mean return, higher std than all but VC
3
Q
Absolute Return_
Alpha Seeking Strategies
A
seek to generate returns that are independent of the market returns
4
Q
Market Segmentation_
Alpha Seeking Strategies
A
exists when capital can not migrate effortlessly from lower expected returns areas to higher ones
5
Q
Concentrated Portfolios_
Alpha Seeking Strategies
A
concentrating assets among fewer securities, less diversification which can lead to higher returns
6
Q
Sharpe Ratio and Downside Risk Results 1990-2009
A
- HF offered the best risk-return ratio, and commodities the worst
- VC displayed similar downside risk as commodities, but higher returns
- HF similar downside risk, but higher Sharpe ratio than bonds
