Real Estate
An individual or institution can purchase real property for private use, investment, or both. This explains why the real estate residential market consists of individual single-family, detached homes, and multi-family attached units. Commercial real estate includes office buildings, retail shopping…
Private Debt
Private Debt Private debt describes different forms of financing extended to private entity investors. Private debt is classified into direct lending, mezzanine loans, venture debt, and distressed debt. Direct Lending Direct lending involves private debt investors offering capital to borrowers…
Private Equity
Private Capital Private capital refers to investment in assets that are not available in public markets. Private capital consists of private equity and private debt. Private Equity Private equity is an investment in privately owned or public companies to privatize…
Returns of Alternative Investments
Custom Fee Arrangements Hedge fund fees are often split into management and incentive fees. For example, a “2 and 20” fee structure implies that a fund manager charges an investor a 2% management fee based on the asset under management…
Performance Appraisal of Alternative Investments
Alternative investments offer investors portfolio diversification opportunities and potentially high returns on a risk-adjusted basis. As such, many investors may neglect the apparent risks and instead focus only on the expected returns. Alternative investments are associated with the following risks:…
Investment and Compensation Structures in Alternative Investments
Different alternative investments, especially hedge and private equity funds, have a partnership structure with a general partner (GP) and limited partners (LPs). In this arrangement, the GP is the fund manager, while the LPs are the accredited investors. The engagement of…
Investment Methods in Alternative Investments
Methods of investing in alternative investments include: Fund investing. Co-investing. Direct investing. Fund Investing In fund investing, investors contribute capital to a fund, and then the fund identifies, chooses, and makes investments on behalf of the investors. Investors pay a…
Categories, Characteristics, and Compensation Structures of Alternative investments
Every possible investment choice is either an alternative or a traditional investment. Traditional investments are investments in: Long-only, publicly traded investments in stocks. Long investments in publicly traded bonds. Cash. In this context, traditional is not a synonym for “common.”…
Alternative Investments 2023
Reading 47 – Introduction to Alternative Investments -LOS 47a: describe types and categories of alternative investments; -LOS 47b: describe characteristics of direct investment, co-investment, and fund investment methods for alternative investments; -LOS 47c: describe investment and compensation structures commonly used…
Modigliani–Miller Propositions
A firm’s capital structure is the mix of debt and equity it uses to finance its investments. A capital structure decision aims to determine the financial leverage to maximize a company’s value by minimizing the weighted average cost of capital (WACC). $$…
