Distributed ledger technology (DLT) based on a distributed ledger (defined later) represents a technological development and offers potential improvements to delivering financing services and financial record keeping. DLT networks are being considered as a means to create, exchange, and track ownership of financial assets on a peer-to-peer (P2P) basis. Potential benefits of using this technology include…
Some specific sources of alpha are the manager skills in specific stock selection and utilising higher-return strategies that minimise risks. The performance of hedge funds can be attributed to three distinct sources: Hedge Fund Investment Risks and Returns
Hedge funds, like private equity funds, are legally typically incorporated and organised as private limited partnerships or limited liability companies with a general partner or managing member who is the hedge fund manager. The partnership or the managing member receives a management fee, and the general partner receives compensation based on fund performance. Hedge fund…
Hedge funds normally apply common principles that seemingly increase portfolio risk, such as borrowing money to invest, using leverage (derivatives), and short selling. On their own, they do not hedge risky positions against a market move; on the contrary, they seem to amplify the risks. It may seem like the name hedge funds is a misnomer. Hedge…
Commodities Physical commodity supply dynamics are determined by production (in the case of hard commodities), seasonal crop yields (for soft commodities), and inventory levels in the short term, while commodity end user/consumer use of these basic inputs drives ultimate demand. Supplies of physical commodities are determined by production and inventory levels and secondarily by the…
Commodity Investment Features Commodities themselves do not generate cash flows but usually incur costs (cost of carry introduced in derivatives learning modules), such as those for transportation, storage, and insurance for physical commodities. Investors seek to benefit from commodity price appreciation (in excess of carry cost) based on their future economic value rather than actual use…
Natural resources comprise different production inputs that are basic to the economy and everyday life: A notable proportion of natural resource investments are directly through farmland, raw land with exploration and mining rights, and timberland. Direct ownership spans a broad spectrum: from farmers producing grain to institutional investors building solar farms. Land Investments vs. Real…
Infrastructure Investment Characteristics Infrastructure investors expect the assets to primarily generate stable long-term cash flows that also adjust for economic growth and inflation and secondarily expect capital appreciation, depending on the type and timing of their investment.
Infrastructure investments have a societal purpose; facilitate broad economic, technological, and social development purposes; and usually combine land, buildings, and other long-lived fixed assets. Infrastructure supports public transportation, airports, utilities (water, gas, and electricity), and more recently, information (telecommunication, cable, and wireless networks). Infrastructure Investments Infrastructure investments often involve a consortium that combines one or…
Source of Returns The return on real estate investments comes from income or asset appreciation or a combination of both. Income-producing real estate generates income primarily from the collection of rental or lease payments, including lease renewals. Expenses include direct and indirect management expenses, such as maintenance and improvement costs. Income-producing real estate investment is…