Both individuals and institutions invest in real property: either in residential or commercial real estate. Residential real estate, or the housing market, consists of individual single-family detached homes and multi-family attached units, which share at least one wall with another unit, such as condominiums, cooperatives, townhouses, or terraced housing. Commercial real estate includes primarily office…
Private Debt Categories Venture debt is private debt funding that provides venture capital backing to start-up or early-stage companies that may be generating little or negative cash flow. Risk–Return of Private Debt Private debt investments may provide higher-yielding opportunities to fixed-income investors seeking increased returns relative to traditional bonds. Private debt funds may generate higher returns…
Private capital is the broad term for funding provided to companies that is not sourced from the public markets, such as from the sale of equities, bonds, and other securities on exchanges, or from traditional institutional providers, such as a government or bank. Capital raised from sources other than public markets and traditional institutions and in…
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.…
