Chapter 12: Alternative Investments

Question 1

Investments in private companies — that is, companies that are not listed on a stock exchange

Answer 1

Private equity

Question 2

Direct or indirect investments in land and buildings

Answer 2

Real estate

Question 3

Investments and physical products, such as precious and base metals, energy products, and agricultural products that are typically consumed or used in the manufacture of goods.

Answer 3

Commodities

Question 4

A private equity investment strategy that consists of financing the early stage of companies that have an innovative business idea.

Answer 4

Venture capital

Question 5

A private equity investment strategy that usually focuses on financing companies with proven business models, good customer bases, and positive cash flows or profits.

Answer 5

Growth equity

Question 6

A private equity investment strategy that consists of financing established companies that require money to restructure and facilitate a change of ownership

Answer 6

Buyouts

Question 7

Private equity investment strategy that focuses on purchasing the debt of troubled companies that may have defaulted or are on the brink of defaulting. Frequently, investments are made at a significant discount apart value — that is, the amount owed to the lenders at maturity.

Answer 7

Distressed

Question 8

Not based on the company’s stage of development. Another strategy that does not involve a cash flow to the company. This strategy involves buying or selling existing private equity investments.

Answer 8

Secondaries

Question 9

A private equity partnership usually includes two types of partners. This partner is typically a private equity firm that sets up the partnership. It is responsible for raising capital, finding suitable investments, and making decisions.

Answer 9

General partner

Question 10

A private equity partnership usually includes two types of partners. This partner is investors who contribute capital to the partnership. They have limited personal liability — that is, they cannot lose more than the amount of capital they contributed to the partnership.

Answer 10

Limited partners

Question 11

Partnerships that specialize in real estate investments.

Answer 11

Real estate limited partnerships

Question 12

In contrast to real estate limited partnerships and real estate equity funds that are private investments, ______ are investments through public markets. These are traded in exchanges and more liquid.

Answer 12

Real estate investment trusts (REITs)

Question 13

Typically hold investments in hundreds of commercial properties. Often open ended funds, meaning that they issue or redeem shares when investors want to buy or sell.

Answer 13

Real estate equity funds