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L3 26 Alternative Investments Portfolio Management > l discuss issues that must be addressed in formulating a private equity investment strategy; > Flashcards

l discuss issues that must be addressed in formulating a private equity investment strategy; Flashcards

L3 26 Alternative Investments Portfolio Management (22 decks)

a describe common features of alternative investments and their markets and how alternative investments may be grouped by the role they typically play in a portfolio;

b explain and justify the major due diligence checkpoints involved in selecting active managers of alternative investments;

c explain distinctive issues that alternative investments raise for investment advisers of private wealth clients;

d distinguish among the principal classes of alternative investments, including real estate, private equity, commodity investments, hedge funds, managed futures, buyout funds, infrastructure funds, and distressed securities;

e discuss the construction and interpretation of benchmarks and the problem of benchmark bias in alternative investment groups;

f evaluate the return enhancement and/or risk diversification effects of adding an alternative investment to a reference portfolio (for example, a portfolio invested solely in common equity and bonds);

g describe advantages and disadvantages of direct equity investments in real estate;

h discuss the major issuers and suppliers of venture capital, the stages through which private companies pass (seed stage through exit), the characteristic sources of financing at each stage, and the purpose of such financing;

i compare venture capital funds and buyout funds;

j discuss the use of convertible preferred stock in direct venture capital investment;

k explain the typical structure of a private equity fund, including the compensation to the fund’s sponsor (general partner) and typical timelines;

l discuss issues that must be addressed in formulating a private equity investment strategy;

m compare indirect and direct commodity investment;

n explain the three components of return for a commodity futures contract and the effect that an upward- or downward- sloping term structure of futures prices will have on roll yield;

o describe the principle roles suggested for commodities in a portfolio and explain why some commodity classes may provide a better hedge against inflation than others;

p identify and explain the style classification of a hedge fund, given a description of its investment strategy;

q discuss the typical structure of a hedge fund, including the fee structure, and explain the rationale for high- water mark provisions;

r describe the purpose and characteristics of fund- of- funds hedge funds;

s discuss concerns involved in hedge fund performance evaluation;

t describe trading strategies of managed futures programs and the role of managed futures in a portfolio;

u describe strategies and risks associated with investing in distressed securities;

v explain event risk, market liquidity risk, market risk, and “J- factor risk” in relation to investing in distressed securities.

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