CFA® Alternative Investments

Summary, Syllabus, and Topics (L1, L2, L3)

Alternative investments are supplemental strategies to traditional long-only positions. The terms “traditional” and “alternative” should not imply that alternatives are necessarily uncommon or that they are relatively recent additions to the investment universe. Alternative investments include such assets as real estate and commodities, which are arguably two of the oldest types of investments.

Alternative investments also include non-traditional approaches to investing in asset classes, such as private equity funds and hedge funds. These funds may give the manager flexibility to use derivatives and leverage, make investments in illiquid assets, and take short positions. The assets in which these vehicles invest can include traditional assets (stocks, bonds, and cash) as well as less traditional assets. Management of Alternative Investments is typically active. This topic explores Alternative Investments, including hedge funds, private equity, real estate, commodities, and infrastructure, covering their common characteristics, and their usefulness for creating diversification and/or higher returns.

Study Tips for CFA Alternative Investments

In addition to the more conventional long-only positions in stocks, bonds, and cash, other assets can be used. Hedge funds, private equity, real estate, natural resources, and infrastructure are the five primary areas of alternative investments. Candidates are not expected to have an extraordinarily in-depth comprehension of this content, at least not for the Level 1 exam, given that this study session is constrained to a single reading with around half a dozen LOS. The readings at Levels 2 and 3 cover the same subcategories but go into more detail.

  • It is critical to be able to discern between the many categories of strategies when dealing with hedge funds.
  • Although the CFA Level 1 Alternative Investments are addressed from a highly qualitative standpoint, it is realistic to anticipate that you may be asked to estimate hedge fund fees.
  • You won't need your calculator much throughout this largely qualitative study session.

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