Alternative Investments - Adv Portfolio Management
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Summary of Alternative Investments, trends and outlooks
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Course
Alternative Investments - Adv Portfolio Management
Institution
Universidad Carlos III De Madrid (UC3M)
This document talks about alternative investments. Basically describes and explains Hedge Funds, Private Markets (Equity and Debt), Commodities. Also it talks about asset allocators, like Pension Funds, Family Offices, Endowments, Sovereign Wealth Funds.
It contains graphs to compare different t...
Alternative Investments - Adv Portfolio Management
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ADVANCED PORTFOLIO MANAGEMENT
ALTERNATIVE INVESTMENTS
MSc. In Finance
, Table of Contents
1.HISTORY OF ALTERNATIVE INVESTMENTS ....................................................................... 4
Bullet Point Ideas on different Alternative Investments ................................................................................ 5
1.2. Role of the “Asset Allocator” Of the Future .................................................................... 6
1.2.1 What Is an Asset Allocator? ................................................................................................................... 6
1.3 Trends of Asset Allocators ................................................................................................ 7
1.4 Challenges for the Future ................................................................................................. 9
2 HEDGE FUNDS .............................................................................................................. 10
2.1 What is a hedge fund? .................................................................................................... 10
2.2 Hedge Fund’s Fees .......................................................................................................... 11
3.3 Types of Hedge Funds .................................................................................................... 12
3.4 Hedge Fund Performance............................................................................................... 12
3.5 Hedge Funds Biases in Performance .............................................................................. 12
3.6 Challenges for the Future ............................................................................................... 13
2.2 TYPES OF HEDGE FUNDS ................................................................................................ 14
2.2.1 Macro and managed futures: .............................................................................................................. 14
2.2.2 Event-Driven HF ................................................................................................................................... 15
2.2.3 Relative Value Hedge Funds................................................................................................................. 15
2.2.4 Equity Hedge Funds ............................................................................................................................. 16
3 PRIVATE MARKETS ....................................................................................................... 17
3.1 What are private markets?............................................................................................. 17
3.2 Market Structure and Dynamics .................................................................................... 18
3.1 Private Equity ................................................................................................................. 20
3.1.1 Venture Capital .................................................................................................................................... 20
3.1.2 Growth Equity ...................................................................................................................................... 20
3.1.3 Buyouts ................................................................................................................................................ 20
, 1.HISTORY OF ALTERNATIVE INVESTMENTS
Alternative Investments (AI) by Inclusion ▪ We can classify four types of Alternative
Investments:
▪ Real assets (including natural resources, commodities, real estate, infrastructure (toll
rodas, ports), and intellectual property)
▪ Hedge funds (including managed futures)
▪ Private equity and private credit (lending outside the banking system)
▪ Structured products (including credit derivatives)
Hedge Funds
A hedge fund is a privately organized investment vehicle that uses its less regulated nature to
generate investment opportunities.
Private equity
includes both equity and debt positions that are not publicly traded:
▪ Venture Capital ▪ Leveraged Buy-outs ▪ Mezzanine financing ▪ Distressed Debt
Structured products
are instruments created to exhibit particular return, risk, taxation, or other attributes. Ex: CDO
(collat. Debt obligation)
GRAPH:
Structured products: from 3 to 1%
Hedge Funds: From 28 to 29%
Real Assets: From 30 to 36%
Private Equity: from 29 to 35%
Moving towards real assets and private equity.
Analogous traditional assets VS its Alternative Assets:
Structured products → vanilla derivatives
Hedge Funds → Mutual funds
Private Equity – Real Assets → public equity
4
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