Hedge funds often use complex strategies to achieve outsized returns with low correlation with the broader market. These more complex strategies require more sophisticated portfolio management tools and a larger range of skills, making them more expensive to run. Rather than paying a very high flat management fee, investors demand that some of the compensation…
Alternative Investment Performance Appraisal Appraising the performance of alternative investments requires more scrutiny in certain areas than traditional asset classes do. Comparability with Traditional Asset Classes Alternative investments are customised investments whose distinctive features complicate performance appraisal between investments and across asset classes. These features include Performance Appraisal and Alternative Investment Features Investment Life Cycle…
Beyond the direct or indirect method of investing in alternatives, the illiquidity, complexity, and long-term nature of these investments require more complex structures to bridge potential gaps between manager and investor interests. Alternative investment structures may explicitly address both the roles and responsibilities of investors and managers to address these gaps. In addition, alternative investment…
Alternative Investment Methods Investors can access alternative investments in three ways: Fund Investment Investors with limited resources and/or experience generally enter into alternative investments through fund investing, where the investor contributes capital to a fund and the fund identifies, selects, and makes investments on the investor’s behalf. For the fund’s services, the investor is charged a…
Investors are often attracted to alternative investments when seeking greater diversification and/or higher expected returns in exchange for what are often longer-term, illiquid investments in less efficient markets. The features of these investments necessitate specific skills and information to evaluate their performance and include unique factors investors must consider if adding them to a portfolio.…