Alternative Investments

Alternative investments are asset classes that do not fit into conventional investment categories such as stocks, bonds, or cash. For CFA Level 1, key alternative investments include:<br><br>Real Estate: Property investments including commercial, residential, REITs (Real Estate Investment Trusts), and real estate funds. These typically offer income generation, potential appreciation, and inflation hedging.<br><br>Private Equity: Investments in non-public companies through venture capital, buyouts, and growth capital. Characterized by higher risk-return profiles and long lock-up periods, typically accessed through limited partnerships.<br><br>Hedge Funds: Pooled investment vehicles employing various strategies like long/short equity, global macro, or event-driven approaches. They aim for absolute returns regardless of market direction and often use leverage and derivatives.<br><br>Commodities: Physical goods like precious metals, energy products, and agricultural products. Investors can access these through futures contracts, ETFs, or physical ownership, providing portfolio diversification and inflation protection.<br><br>Infrastructure: Investments in essential public assets like transportation systems, utilities, or communication networks. These offer stable cash flows and are often less correlated with economic cycles.<br><br>Key characteristics of alternative investments include:<br>- Limited liquidity compared to traditional investments<br>- Less regulation and transparency<br>- Higher minimum investments<br>- Complex valuation methodologies<br>- Potential for portfolio diversification<br>- Different risk-return profiles than traditional investments<br>- Often require specialized knowledge to evaluate<br><br>For CFA Level 1, candidates should understand these asset classes' basic structures, valuation approaches, risk characteristics, due diligence requirements, and role in portfolio construction.

Alternative investments are asset classes that do not fit into conventional investment categories such as stocks, bonds, or cash. For CFA Level 1, key alternative investments include:<br><br>Real Est…

Concepts covered: Infrastructure Investments, Private Equity/Venture Capital, Real Estate, Commodities, Hedge Funds