week 5 Alternative investments
Alternativeinvestments
Is anassetof financialassetotherthantraditionalinvestmentclasses e.gstocksbondsicas
As simpleas investmentin gold oil artwork
Or investment incomplexproductor strategy
Tend to have
lessclearlegalstructure regulationand transparency
lessliquidity
Differenttaxation
less or no historical data foranalysis
Problems risks
1 liquidity
canbedifficultto sellassetfor fairvalue
canberareaccessto marketmay belimitednumberof buyerscanbe liquid
lack of liquidity mayresult in a reduceordiscountedprice firesale
2 valuation
Maybeditticuttovalue
no recentsalesto similarasset
3 Trends andfashions
changeintrend fashion or even a lack ofinterest cancause hugevolatility in asse
pricese.gBitcoinor Antiques
4 lackofincome
maylack any incomepayments e.gpaintings whichmay limittheir usefulness with
a portfoliodependingon clients personalrequirements
5 Transactioncosts
Maybehighdue to specialisednatureof markets
, 6 Regulation
Maybelessor littleregulation ofcertainassets
7 fraudandforgery
lessregulationsomore likelyforfakes
Typesof alternative investments
1 Privateequity orventure capital
Invest in privatecompanies
Intudes institutionalinvestors highnetworthindividualsfirmsthatbystaves in private
companies
Preter relatively matureand establishcompanies
2 Venturecapitalfunds
Providesentrepreneurs with financingto establishand
growtheirfirms inreturnthere
recieveequityof thefirm
VCinvestssupportsyoungcompanies
Most ve areset upaslimitedpartners
themanagement companyof ve startswith its own moneyand raisesadditional
capitalfromlimitedpartnerssuch aspensionfunds
Thesuccessof new firmdepends onmanagement
3 Hedgefirms
pooloffundsthat are managedby professionalfundmanagers usingvariousstrateg
to makepositive return
considered ariskyinvestmentandthey acceptinvestmentsfrom accredicted investors
who haveminimumlevelof income or assets
Alternativeinvestments
Is anassetof financialassetotherthantraditionalinvestmentclasses e.gstocksbondsicas
As simpleas investmentin gold oil artwork
Or investment incomplexproductor strategy
Tend to have
lessclearlegalstructure regulationand transparency
lessliquidity
Differenttaxation
less or no historical data foranalysis
Problems risks
1 liquidity
canbedifficultto sellassetfor fairvalue
canberareaccessto marketmay belimitednumberof buyerscanbe liquid
lack of liquidity mayresult in a reduceordiscountedprice firesale
2 valuation
Maybeditticuttovalue
no recentsalesto similarasset
3 Trends andfashions
changeintrend fashion or even a lack ofinterest cancause hugevolatility in asse
pricese.gBitcoinor Antiques
4 lackofincome
maylack any incomepayments e.gpaintings whichmay limittheir usefulness with
a portfoliodependingon clients personalrequirements
5 Transactioncosts
Maybehighdue to specialisednatureof markets
, 6 Regulation
Maybelessor littleregulation ofcertainassets
7 fraudandforgery
lessregulationsomore likelyforfakes
Typesof alternative investments
1 Privateequity orventure capital
Invest in privatecompanies
Intudes institutionalinvestors highnetworthindividualsfirmsthatbystaves in private
companies
Preter relatively matureand establishcompanies
2 Venturecapitalfunds
Providesentrepreneurs with financingto establishand
growtheirfirms inreturnthere
recieveequityof thefirm
VCinvestssupportsyoungcompanies
Most ve areset upaslimitedpartners
themanagement companyof ve startswith its own moneyand raisesadditional
capitalfromlimitedpartnerssuch aspensionfunds
Thesuccessof new firmdepends onmanagement
3 Hedgefirms
pooloffundsthat are managedby professionalfundmanagers usingvariousstrateg
to makepositive return
considered ariskyinvestmentandthey acceptinvestmentsfrom accredicted investors
who haveminimumlevelof income or assets
