Lecture 8 - Other Alternative Investments Flashcards
Private Equity/Debt
Funds and investors that directly invest in private companies or engage in buyouts of public companies
Types or Private Equity/Debt
1) Venture Capital
2) Buyouts
3) Special Situations
Venture Capital Subdivisions
1) Seed
2) Early Stage
3) Later Stage
Buyout process
1) Company seeks a buyer through an investment bank
2) Confidentiality agreement is signed and PE firms agrees to not buy any shares
3) Due diligence
4) Deal is negotiated and closed
5) Work with management to improve company
6) Sale to competitor, PE firm, or IPO
Real Asset Funds
1) Commodities/Precious Metals
2) Real Estate
3) Infrastructure
4) Real Return Bonds
Benefits of Real Asset Funds
- Diversification
- Long-term investment
- Inflation protection
Cons of Real Asset Funds
- Low liquidity
- Large capital/time is required
- Lack of flexibility
Commodities/Precious Metals categories
1) Energy
2) Metals
3) Livestock & Meat
4) Agriculture
Factors driving Gold prices higher
- Seen as a safe haven during volatile times and geopolitical risk
- Interest from investors and central banks
- Increase in global money supply
- Advanced economies policy makers favor fiscal expansion
Real Estate Funds
1) Real Estate Limited Partnerships (RELP)
2) Real Estate Investment Trust (REIT)
RELP
Formed to purchase and hold a portfolio of properties where the property manager is the general partner and outside investors are limited partners
REIT
Created when a corporation or trust is formed to use investors’ money to purchase, operate and sell income-producing properties
Infrastructure Funds
Invest in essential public assets such as toll roads, airports, etc.
Benefits of infrastructure funds
Predictable returns due to low levels of competition and high barriers to entry
Real Return Bonds
Issued by the Government of Canada and/or provinces that pay a rate of return that is adjusted for inflation
