Monitoring Alternative Investment Programs
Overall Investment Program Monitoring Investors enter alternative investment programs with specific goals: risk reduction, return enhancement, income, or a mix of these. These programs are long-term commitments, so it’s crucial to continuously monitor their progress. Investors must ensure that their…
Liquidity Planning
When managing portfolios with alternative investments, managing liquidity risk becomes crucial. You need enough liquidity for: Periodic payments to beneficiaries. Rebalancing the portfolio or funding new asset manager mandates. Meeting commitments to private investment funds when they call for capital….
Approaches to Asset Allocation and Statistical Characteristics and Challenges
Modeling risks and returns for alternative investments is challenging due to two key factors: Stale Valuations: Private alternative investments often rely on appraisals for valuations, which can be outdated or artificially smoothed. This leads to underestimated fundamental risks when calculating…
Suitability Considerations
Investment Horizon Private real estate investments, private real assets, and private equity investments are generally unsuitable for investors with less than a 15-year time horizon. Assuming no new investments are made after the 7-year mark, an investment can take five…
Risk Factors, Expected Returns, and Investment Instruments
When considering investments in alternative asset classes beyond risk, return, and correlation, practical complexities must be addressed. Neglecting these distinctions between traditional and alternative investments can jeopardize an investment strategy. Key factors to contemplate include: Defining risk characteristics: Understand the…
Traditional and Risk Based Approaches to Asset Classification
To effectively analyze a portfolio or potential investment opportunities, investors must establish a comprehensive and mutually exclusive categorization scheme, known as the ‘opportunity set.’ This is crucial to ensure that all investments are considered and prevent double-counting or missed opportunities….
Diversifying Equity Risk
Impact of Adding Either Bonds or Alternative Investments to an Equity Portfolio It’s crucial to distinguish between two distinct dimensions of risk: volatility and the likelihood of achieving a target return. To comprehensively evaluate the impact of introducing either bonds…
The Role of Alternative Investments in a Multi-asset Portfolio
When considering adding alternative investments to a portfolio, investors need to know what benefits to expect. Alternative investments span the spectrum between risk-reducing and return-enhancing. This lack of consistency is a familiar theme with alternative investments. Each one will be…
Study Notes for CFA® Level III – Fixed-Income Portfolio Management – offered by AnalystPrep
Reading 19: Overview of Fixed-Income Portfolio Management Los 19 a: Discuss roles of fixed-income securities in portfolios and how fixed-income mandates may be classified Los 19 b: Describe fixed-income portfolio measures of risk and return as well as correlation characteristics…
An Approach to Assessing Yield Curve Strategies
Scenario Analysis As described earlier, many factors can change the return of a fixed-income portfolio, including changes in the yield curve. These changes can involve the curve’s slope, level, shape, and underlying currencies. Scenario analysis refers to a set of…
