Alternatives Flashcards
What were two original alternative asset classes?
Originally AA was only stocks and bonds.
Commodities and Real Estate were both considered Alternatives
What was the purpose of using assets like commodities and Real estate?
Protect against inflation during rising price periods.
What other capitalization level of stocks is also regarded as an Alternative
Micro Caps
What subset of Emerging Market stocks is now regarded as an alternative?
Frontier Market Stocks
What are other assets that can be used for Hedging?
Inverse and market neutral funds
What is the defining feature of an inverse fund?
It provides the exact opposite return of a particular market of choice.
They are a hedge against a certain risk and let you bet against a certain market.
What is the primary aim of a market neutral fund?
hedge fund–like investment that attempts to deliver positive results regardless of what type of market conditions exist.
What is another name for a market neutral fund? and its key attribute.
Long short - which give managers license to simultaneously bet on stocks (as you would do in any traditional fund) while also betting against other shares.
The idea is create a portfolio whose performance has almost nothing to do with the general direction of the market.
Compare Hedge fund vs Stocks Annualized volatility and returns
hedge funds have delivered similar if not better returns than equities since 1986 but with close to half the annualized vol - 8% vs 15%
Cambridge Assocaites.
