CIFA Advanced Level
Alternative Investments Analysis cheat sheet
Every chapter's key points, formulas and definitions on one page, for the last week before the exam. Each heading links to the chapter that explains it.
Introduction to alternative investments
- Alternative investments differ from conventional ones on four dimensions: they are generally illiquid, lightly regulated, driven by manager skill and illiquidity premia rather than broad market beta, and valued infrequently by appraisal or model.
- Their defining features are illiquidity, low correlation with traditional assets, greater use of leverage, higher fees, lighter regulatory oversight and heavier reliance on manager skill.
- They are held through their own structures: limited partnership interests or fund shares, privately negotiated trading, management plus incentive fees, and layers such as funds of funds and co-investment vehicles.
- Investors hold them for four goals: diversification, return enhancement, inflation protection and access to opportunities public markets do not offer.
- Illiquidity is the one property that explains most of the rest, from higher fees to infrequent valuation and the illiquidity premium.
Key terms
- Regulatory structures
- Different legal and regulatory regimes apply depending on jurisdiction and investor type (institutional versus retail), often exempting alternative vehicles from the fuller disclosure regime applied to public securities (covered in CIFA Regulation of Financial Markets, under investment funds).
- Securities structures
- Limited partnership interests, fund shares, or direct co-investment rights, rather than the standardised listed securities covered in CIFA Regulation of Financial Markets.
- Trading structures
- Often privately negotiated and illiquid, rather than traded on a securities exchange (covered in CIFA Regulation of Financial Markets).
- Compensation structures
- Management and incentive fees (see the chapter on hedge funds), rather than a simple expense ratio.
- Institutional structures
- Funds of funds, separately managed accounts, and co-investment vehicles, layering additional structure between the underlying investment and the ultimate investor.
The rest of the sheet covers
- The environment of alternative investments
- Real assets
- Real estate
- Hedge funds
- Private equity
- Private equity strategies
- Crowdfunding
- Structured products and asset-backed securities
- Mortgage-backed securities
- Valuing mortgage-backed and asset-backed securities
- Commodities: markets, contracts and returns
- Commodity futures pricing, indices and risk
- Exam technique and revision
- Glossary