Blackbook draft 1

Content type

User Generated

Uploaded By

xneguvxonwnw1910

Pages

OBJECTIVES

1. A study on alternative investments and its types

2. A study on the investing power and interests of the investors

3. To study investors preference of alternative investment security

4.A study on awareness and use of alternative investment

CATEGORIES OF ALTERNATIVE INVESTMENTS (Secondary Data)

Considering the variety of characteristics common to many alternative investments, it is not

surprising that no consensus exists on a definitive list of these investments. There is even

considerable debate as to what represents a category versus a sub-category of alternative

investments. For instance, some listings define distressed securities as a separate category,

whereas others consider distressed securities as a sub-category of the hedge funds and/or

private equity categories, or even a subset of high-yield bond investing. Similarly, managed

futures are sometimes defined as a separate category and sometimes as a sub-category of hedge

funds and/or commodities. The following list offers one approach to define broad categories of

alternative investments. Each category is described in detail later in this reading.

• Hedge funds. Hedge funds are private investment vehicles that manage portfolios of securities

and derivative positions using a variety of strategies. They may use long and short positions,

may be highly leveraged, and aim to deliver investment performance that is independent of

broad market performance.

• Private equity funds. Private equity funds generally invest in companies (either start-up or

established) that are not listed on a public exchange, or they invest in public companies with

the intent to take them private. The majority of private equity activity involves leveraged

buyouts of established profitable and cash-generative companies with solid customer bases,

proven products, and high-quality management. Venture capital, which typically involves

investing in or providing financing to start-up or young companies with high growth potential,

is a small portion of the private equity market.

• Real estate. Real estate investments may be in buildings and/or land, including timberland

and farmland, either directly or indirectly. The growing popularity of securitizations broadened

the definition of real estate investing. It now includes private commercial real estate equity

(e.g., ownership of an office building), private commercial real estate debt (e.g., directly issued

loans or mortgages on commercial property), public real estate equity (e.g., REITs), and public

real estate debt (e.g., mortgage-backed securities) investments.

• Commodities. Commodities investments may be in physical commodity products such as

grains, metals, and crude oil, either through owning cash instruments, using derivative

products, or investing in businesses engaged in the production of physical commodities. The

main vehicles investors use to gain exposure to commodities are commodity futures contracts

and funds benchmarked to commodity indexes. Commodity indexes are typically based on

various underlying commodity futures.

• Infrastructure. Infrastructure assets are capital-intensive, long-lived, real assets, such as roads,

dams, and schools, which are intended for public use and provide essential services.

Infrastructure assets may be financed, owned, and operated by governments, but increasingly

the private sector is investing in infrastructure assets. Investors may gain exposure to these

assets directly or indirectly. Indirect investment vehicles include shares of companies, ETFs,

private equity funds, listed funds, and unlisted funds that invest in infrastructure.

• Other. Other alternative investments may include tangible assets (such as fine wine, art,

antique furniture and automobiles, stamps, coins, and other collectibles) and intangible assets

(such as patents)

HEDGE FUNDS

In 1949, Alfred Winslow Jones, a sociologist investigating fundamental and technical research

to forecast the stock market for Fortune magazine, set up an investment fund with himself as

GP. The fund followed three key tenets: (1) Always maintain short positions, (2) always use

leverage, and (3) charge only an incentive fee of 20% of profits with no fixed fees. Jones called

his portfolio a “hedged” fund (eventually shortened to “hedge fund”) because he had short

positions to offset his long positions in the stock market. Theoretically, the overall portfolio

was hedged against major market moves.

Although Jones’ original three tenets still have some relevance to the hedge fund industry, not

all hedge funds maintain short positions and/or use leverage, and most hedge funds have some

non-incentive fees. A contemporary hedge fund may have the following characteristics:

End of Preview - Want to read all 28 pages?

Access Now

Unformatted Attachment Preview

OBJECTIVES 1. A study on alternative investments and its types 2. A study on the investing power and interests of the investors 3. To study investors preference of alternative investment security 4.A study on awareness and use of alternative investment CATEGORIES OF ALTERNATIVE INVESTMENTS (Secondary Data) Considering the variety of characteristics common to many alternative investments, it is not surprising that no consensus exists on a definitive list of these investments. There is even considerable debate as to what represents a category versus a sub-category of alternative investments. For instance, some listings define distressed securities as a separate category, whereas others consider distressed securities as a sub-category of the hedge funds and/or private equity categories, or even a subset of high-yield bond investing. Similarly, managed futures are sometimes defined as a separate category and sometimes as a sub-category of hedge funds and/or commodities. The following list offers one approach to define broad categories of alternative investments. Each category is described in detail later in this reading. • Hedge funds. Hedge funds are private investment vehicles that manage portfolios of securities and derivative positions using a variety of strategies. They may use long and short positions, may be highly leveraged, and aim to deliver investment performance that is independent of broad market performance. • Private equity funds. Private equity funds genera ...
Purchase document to see full attachment