Alternative Investments

ALTERNATIVE INVESTMENTS SUMMIT
MAY 7TH 2018
Speaker:
Keith Black, PhD, CFA, CAIA (Managing Director, CAIA)
Panel:
Dan Schwartz, CFA (Vice President, AQR)
Eileen Duff (Managing Partner, iCapital)
David Hemming (Senior PM, PowerShares by Invesco)
ABOUT CFA ORLANDO
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active members and continue to grow with
in our local community.
MISSION: Our mission is to foster a vibrant

and ethical investment community by
delivering member value, developing
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integrity in central Florida.
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The State of Alternative
Investments: A Global View
Keith Black, PhD, CFA, CAIA
Showcase your Knowledge @CAIA_Keith Black

@CAIAAssociation
About CAIA Association
The global leader in alternative investment education

 Non-profit established in 2002, based in Amherst, MA, with
offices in Hong Kong, Singapore, Geneva, and London
 Over 9,000 current charterholders in more than 90 countries
 30 vibrant chapters located in financial centers around the
world
 More than 150 educational and networking events each year
 Excellence in AI education through the CAIA designation and
the Fundamentals of Alternatives certificate program
State of Alternative Investment – 7

Alternative Investment Education
Alternatives currently represent over $14 trillion in assets

under management, while assets in liquid alternatives
have grown substantially.
The CAIA Association Mission:

 Establish the CAIA designation as the benchmark for alternative
investment education worldwide
 Promote professional development through continuing education,
innovative research and thought leadership
 Advocate high standards of professional ethics
 Connect industry professionals globally

The CAIA Charter Designation
 Globally recognized credential for professionals

managing, analyzing, distributing, or regulating
alternative investments.
 Highest standard of achievement in alternative
investment education.
 Comprehensive program comprised of a two-tier
exam process:
 Level I assesses understanding of various alternative asset classes
and knowledge of the tools and techniques used to evaluate the
risk-return attributes of each one.
 Level II assesses application of the knowledge and analytics
learned in Level I within a portfolio management context.
 Both levels include segments on ethics and professional conduct.

Fundamentals of Alternative Investments
The Fundamentals of Alternative Investments certificate

program provides a foundation of core concepts in
 Fundamentals fills a critical education gap for those
who need to understand the evolving landscape of
 Online, 20-hour, self-paced course

 Earns CE hours for the CIMA®, CIMC®, CPWA®, CPA ®, and CFP®
designations
 Understand the core concepts in alternative investments
 Gain confidence in discussing and positioning alternatives

Are US Equity Markets Rich?
S&P 500 P/E Ratio

35.00
30.00
25.00
S&P 500 P/E Ratio
20.00
15.00
10.00
5.00
0.00
Source: CAIA and Bloomberg. Data through February 2, 2018.

Fixed Income 30+ Year Bull Market
18
16
14
12
10
Yield
-2
German Bund 10 Year US 10 Year

Source: CAIA and Bloomberg. Data through February 2, 2018

Asset Class Performance
Ending
Sept
2017
Draw-
1 Yr 5 Yr 10 Yr Ann. Vol down
S&P 500 18.6% 14.2% 7.4% 15.7% -45.8%
Barclays US Aggregate 0.1% 2.1% 4.3% 3.3% -3.0%
US 60/40 10.9% 9.3% 6.6% 9.1% -27.4%
MSCI World 18.2% 11.0% 4.2% 17.1% -49.0%

Barclays Global Aggregate -1.3% 0.5% 3.3% 6.2% -7.2%
Global 60/40 10.1% 6.8% 4.3% 11.0% -30.9%
Bloomberg Commodities -0.3% -10.5% -6.8% 19.7% -65.9%

HFRI Fund Weighted Composite 7.1% 4.7% 3.1% 7.4% -19.0%
NCREIF Timberland 3.3% 7.1% 5.2% 4.7% -5.7%
NCREIF Farmland 6.2% 12.7% 12.6% 5.5% 0.0%
NCREIF Property 6.9% 10.3% 6.2% 5.7% -23.9%
Cambridge Associates US Private Equity 16.8% 13.3% 9.6% 9.0% -25.1%
Cambridge Associates US Venture Capital 8.0% 14.1% 8.9% 8.2% -18.4%
Global Invested Alternative Assets Portfolio 8.3% 9.3% 6.3% 6.9% -21.9%
US 40% Stocks/40% Bonds/20% Portfolio 8.9% 8.4% 6.3% 7.3% -21.9%
Global 40% Stocks/40% Bonds/20% Portfolio 8.2% 6.5% 4.6% 8.8% -25.1%
Source: CAIA and Bloomberg. Quarterly returns. Annualized volatility and max draw-down are from December 2006 – September 2017.

Public Pension Investment Returns Assumptions
 Nearly three-fourths of
Public Pensions have
reduced their investment
return assumption since
fiscal year 2010, resulting in
a decline in the average
return assumption from 7.9%
to 7.5%.
 Should projected returns

continue to decline,
investment return
assumptions are likely to
also to continue their
downward trend.

Market Size of Investments
Traditional Alternative
Investments Investments
U.S. Equity $21,100 Private Equity $4,200
Other Developed Market Equity $15,100 Hedge Funds $3,000
Emerging and Frontier Market Equity $4,100 Real Estate Equity $6,700
Infrastructure, Farmland, Timberland,
Emerging Market Debt $3,000 $620
and Private Energy
High Yield Bonds and Bank Loans $3,200 Commodity swaps, ETPs and MTNs $230
Dollar Bonds $19,300
Real Estate Debt $6,000
Other Bonds $21,100
Cash $5,100
Total (in $billions) $98,000 Total $14,750
Source: 2016 Estimates from Aon Hewitt, HFR, Barclays, Preqin

Participation In Alternatives
Source: Preqin Investor Outlook: Alternative Assets, H1 2018

Institutional Investor Allocation

Alternative Investment Allocations
 The largest endowments have average allocations of:

 13% US equity, 19% non-US equity, 11% in fixed income and cash
 24% hedge funds, 19% PE/VC, 14% real assets
30%
25%
20%
15%
10%
5%
0%
Real Estate Hedge Funds Private Equity + Venture Natural Resources
Capital
2002 2004 2006 2008 2010 2012 2014 2016 2017
Source: NACUBO-Commonfund Study of Endowments, 2017

Average SWF Asset Allocation
100%
90% 15.4% 16.2%

25.7% 27.5%
80%
70%
35.3%
40.0%
60%
41.0% 37.6%
50%
40%
30%
48.3%
20% 43.8%
33.3% 34.8%
10%
0%
2002 2007 2012 2014
Cash and Fixed Income Equities Private Markets
Source: “How do Sovereign Wealth Funds Invest? A Glance at SWF Asset Allocation,” E. Hentov, State Street Global Advisors, December 2015

Avg. Asset Allocation by Investor Type
20.0%
19.0%
18.0%
16.0%
14.0%
12.0%
11.0% 11.0%
10.0%
9.0%
8.3%
7.9%
8.0% 7.4%
6.3% 6.2%
5.8% 6.0%
6.0% 5.4%
4.0% 3.5%
3.2%
2.5%
2.0%
N/A
0.0%
Private Equity Hedge Funds Real Estate Infrastructure
Private Pensions Public Pensions Sovereign Wealth Funds Endowments and Foundations
Source: Preqin 2016

Key Issues Facing Hedge Funds in 2018
Performance 70%
Fees 65%
Perception of Industry by Public 38%
Volatility/Uncertainty in Global Markets 38%

Proportion of Respondents
Governance 21%
Transparency 19%
Regulation 19%
Pricing/Valuations 17%
Portfolio Management 13%
Interest Rates 3%
Notable Investors Exiting Asset Class 3%

Estimated Hedge Fund AUM Growth
$3,500
$3,210.7
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
($500)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Estimated Assets Estimated Asset Flow
Source: HFR® Global Hedge Fund Industry Report – Fourth Quarter 2017 | Copyright 2017. All rights reserved. | www.HedgeFundResearch.com

Estimated Alternative UCITS AUM Growth
500 €
456.8 €
450 €
400 €
350 €
AUM (MioEur)
300 €
250 €
200 €
150 €
100 €
50 €
0€
Source: LuxHedge Database. Data as of December 31, 2017

Liquid Alternative Market Growth
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Real estate-linked Nontraditional bond Bear Market Commodity Currency
Equity Market Neutral Long/Short Equity Managed Futures Multialternative
Source: CAIA and Morningstar

Flows from Active Management

Estimated Assets by Strategy
Alternative Total Hedge Fund

UCITS Industry
Source: HFR® Global Hedge Fund Industry Report – Third Quarter 2017 | Copyright 2017. All rights reserved. | www.HedgeFundResearch.com
Estimated Number of Funds: HF vs. FoF
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
FoF HF

Funds with Inflows vs. Outflows
Single-Manager Funds Fund of Funds
Inflows
22.00%
Inflows
47.18%
Outflows
52.82%
Outflows
78.00%

Distribution of Industry Assets: Firm AUM Tier
By # of Firms By Firm AUM Size

1.01% 1.76% 2.68%
6.45% 3.64%
13.70%
22.05%
46.11%
7.46%
10.77%
68.86%
15.51%
< $100 Million $100 to $250 Million $250 to $500 Million < $100 Million $100 to $250 Million $250 to $500 Million
$500M to $1 Billion $1to $5 Billion > $5 Billion $500M to $1 Billion $1to $5 Billion > $5 Billion

Rising Sector Dispersion
3 Year Rolling Correlation with S&P 500 Index

1.00 $3.00
0.90
$2.50 0.91 - Technology

0.80
0.91 - Industrials
0.90 - Consumer Discretionary
Growth of $1 with the S&P 500 TR

0.70 0.85 - Financials
$2.00 0.83 - Materials
0.81 - Health Care
0.60
0.79 - Average
Correlation
0.75 - Consumer Staples

0.50 $1.50
0.69 - Energy
0.41 - Utilities
0.40 $2.24 - Growth $1 of SPX
$1.00
0.30
0.20
$0.50
0.10
0.00 $0.00
Source: CAIA and Bloomberg. Data through February 6, 2018

Private Capital AUM by Asset Class
6,000
5,000 4,925
4,582
4,268
Assets under Management ($bn)
3,944
4,000 3,805
3,288
3,038
3,000
2,758
2,456
2,238 2,258
2,000
1,673
1,215
1,000
0
Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-17
Private Equity Private Debt Real Estate Infrastructure Natural Resources
Source: Preqin Online Products

Private Capital Dry Powder by Asset Class
2,000
1,800
181
1,600
160
1,400
249
Dry Powder ($bn)
1,200
234
1,000
800
600
1,004
400
200
0
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Private Equity Private Debt Real Estate Infrastructure Natural Resources

Private Equity Assets Under Management
3,500
3,000
2,829
2,582
2,500 2,388
2,242
2,189
2,000 1,947
1,807
1,733
1,586
1,477
1,500 1,430
1,162
1,000 888
713
663
582 594 598
500
0
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-17
Dry Powder ($bn) Unrealized Value ($bn)
Source: Preqin Private Equity Online

Private Equity Dry Powder by Fund Type
1200
1000
954
838
800
754
Dry Powder ($bn)
682 675 674 689

635 619
599
600 560
528
388
400
325 311
307 291
256
200
0
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Buyout Venture Capital Growth Other

Annual Capital Called up and Distributed by
Private Equity Funds
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017
-100
-200
Capital Called up ($bn) Capital Distributed ($bn) Net Cash Flow ($bn)

Venture Capital Public Market Equivalent
1.40 If PME index value (X) is >1, private

equity has outperformed the public
market
1.30
1.20
1.10
PME Value (X)
1.00
KS PME Using Russell 2000 TR (X)
0.90
0.80
0.70
0.60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Vintage Year
Source: Preqin Online Products . As of June 2017

Venture Capital Deals* Completed Globally
14,000 200
13,019
182 180
12,015 11,944
12,000
10,980 11,145
160
9,920 148
10,000 143
140
Aggregate Deal Value ($bn)

8,313
120
8,000
No. of Deals
6,804 100 100
6,000 5,506
5,308 5,431 80
62 60
4,000 58 58
50
45 46
40
37
2,000
20
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
No. of Deals Aggregate Deal Value ($bn)

*Figures exclude add-ons, grants, mergers, secondary stock purchases and venture debt.
Number of Venture Capital Deals* by Region
14,000
12,000
10,000
8,000
No. of Deals
6,000
4,000
2,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
North America Europe Greater China India Israel Other
Source: Preqin Private Equity Online.


Aggregate Value of Venture Capital Deals*
by Region
200
180
160
140
120
No. of Deals
100
80
60
40
20
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
North America Europe Greater China India Israel Other
Source: Preqin Private Equity Online.


Unlisted Natural Resources Dry Powder by
Primary Strategy
250
200
1
5
6
1
4
6
1
5 Water
0 5
150 4
7
1 Timberland
5
8
Metals & Mining
0
4
100 4 163 Energy
1
4 152
2
0
2 0
2 0 135 Diversified
2 1 3
2 123
0
1
2 Natural Resources
111
Agriculture/
91 Farmland
50 0
1 78
63 73 70 70
40
11 11 11 10
8 5 9
7 9 6 8 7 9 8 10 8
0 1 2 3 2 3 3 5 6
Source: Preqin Natural Resources Online

Unlisted Natural Resources Funds in Market by
Primary Geographic Focus
120
112
100
80
67
60 58
54
40
27
22
20 17
0
North America Europe Asia Rest of World
No. of Funds Raising Aggregate Capital Targeted ($bn)
Source: Preqin Natural Resources Online. As of January 2018

Natural Resources
Sectors that Investors View as Presenting the Best Opportunities, 2016 vs.
2017
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Agriculture/ Conventional Renewable Metals & Timberland Water
Farmland Energy Energy Mining
12/1/2016 12/1/2017

Natural Resources
Investor Views on the Macroeconomic Factors that Had the Biggest Impact
on Their Natural Resources Portfolios in 2017 vs. Predictions for 2018
37%
Commodity Price Movements
49%
11%
Geopolitical Landscape
10%
11%
Possibility of Interest Rate Rises
7%
9%
Low Interest Rates
10%
7%
Currency Market Movements
8%
7%
Unwinding of Central Bank Balance Sheets
0%
6%
US Trade Policy
5%
6%
US Domestic Policy
7%
4%
Equity Market Movements
3%
0% 10% 20% 30% 40% 50% 60%

2018 2017
Source: Preqin Investor Interviews, December 2017

0.00
0.20
0.40
0.60
(0.80)
(0.60)
(0.40)
(0.20)
1/1/1994
7/1/1994
1/1/1995
7/1/1995
1/1/1996
7/1/1996
1/1/1997
7/1/1997

1/1/1998
7/1/1998
1/1/1999
7/1/1999
1/1/2000
7/1/2000
1/1/2001
7/1/2001
Hedging Inflation
1/1/2002
7/1/2002
1/1/2003
7/1/2003
S&P 500
1/1/2004
7/1/2004
1/1/2005
Source: CAIA and Bloomberg. Data through February 28th 2018

7/1/2005
1/1/2006
7/1/2006
1/1/2007
7/1/2007
1/1/2008
7/1/2008
Bloomberg Commodity
1/1/2009
36 Month Rolling Correlation to CPI
7/1/2009
1/1/2010
7/1/2010
1/1/2011
7/1/2011
1/1/2012
7/1/2012
1/1/2013
7/1/2013
1/1/2014
7/1/2014
1/1/2015
7/1/2015
1/1/2016
7/1/2016
1/1/2017
7/1/2017
1/1/2018
Inflation Betas
Where can institutional investors turn to hedge their inflation

risk?
 Studies have found that a few assets can hedge inflation risk
(positive inflation beta), while the majority of institutional
assets have a risk to rising inflation (negative inflation beta)
20 Year US S&P 500 3 Month T‐ Farmland Commodity

Treasuries bills Futures
‐3.1 ‐2.4 0.3 1.7 6.5
 Within equities, smaller cap stocks and less capital intensive

sectors have even greater inflation risk
 In practice, many institutions build a real assets allocation,
investing 5% to 20% of the portfolio in timberland, farmland,
linkers and commodity futures
“Deflating Inflation: Redefining the Inflation-Resistant Portfolio”, Bernstein Global Wealth Mgmt, 2010

Timing Commodity Investments
 Average Returns by Stage of the Business Cycle,

1959-2004
Stocks Commodities
Early Expansion 16.3% 6.8%
Late Expansion 10.4% 16.7%
Early Recession ‐18.6% 3.7%
Late Recession 19.7% ‐1.6%
Gorton/Rouwenhorst, “Facts and Fantasies about Commodity Futures”, Financial Analysts Journal, 2006

Potential Demand: Rebalancing from Equities
 Commodity prices have declined while equity markets

have risen sharply

Potential Demand: Electric Cars
 France and the UK have

banned the sale of new
gasoline and diesel
vehicles after 2040
 1 million electric vehicles
sold in 2017, half in
China, with estimates of
14 million vehicles per
year by 2025
 Growth in electric
vehicles is bullish for
natural gas, copper,
lithium, and cobalt and
bearish for gasoline and
lead
 Significant deficits of
cobalt expected
Source: Bloomberg, Reuters, and Benchmark Mineral Intelligence
through 2020
Private Debt Assets under Management
700
600
Assets Under Management ($bn)
500
411
400
300
200
227
100
0
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-17
Source: Preqin

Private Debt AUM by Fund Type (As of June 2017)
250
200
150
100
50
0
Direct Lending Distressed Debt Mezzanine Special Situations Venture Debt
Source: Preqin

Private Debt Funds in Market by Fund Type
Yield Breakdown by Fund Type

100%
• Venture Debt: 20% 90%
Venture Debt
• Private Debt FoF: 10% – 12%

80%
70%
Special Situations
• Special Situation: 10.8% 60%
Fund of Funds
• Mezzanine: 8.8% 50%
40% Mezzanine
• Distressed Debt: 7.3%
30%
Distressed Debt
• Direct Lending: 7.5% 20%
10% Direct Lending
0%
No. of Funds Raising Aggregate Capital Targeted
Source: Preqin. As of January 2018

Private Debt Geographic Focus
Private Debt Funds in Market by Primary Make-up of Investors in Private Debt

Geographic Focus (As of January 2018) by Location
200 100%
6% 8% 8%
178 6%
180 90%
9% 11%
160 80%
26%
140 70% 25% 24%
120 60%
100 50%
88
82
80 40%
60 30% 62%
58% 57%
42 44
40 31 20%
20 11 10%
8
0 0%
North America Europe Asia Rest of World Jan-16 Jan-17 Jan-18
No. of Funds Raising Aggregate Capital Targeted ($bn) North America Europe Asia Rest of World
Source: Preqin

Dry Powder: Private Debt vs. Buyout
Growth of Dry Powder over the past 9 years:
• Private Debt has grown 77% • Buyout has grown 11%
600
535 530
500 476 477 473
447
423 432
400 388
Dry Powder ($bn)
360
300
215
190 196 196
200 176
131 132
111 104 116
100
0
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Mar-17
Private Debt Buyout
Source: Preqin

Key Challenges Facing Unlisted Infrastructure
Managers in 2018
Valuations 59%
Regulation 36%
Deal Flow 33%
Fee Pressure 23%
Performance 20%
Interest Rates 20%
Fundraising 20%
Fulfilling Investor Demand 19%
0% 10% 20% 30% 40% 50% 60% 70%

Source: Preqin Fund Manager Survey, November 2017

Unlisted Infrastructure AUM
450
400
350
300
268
238
250
216
200 190
165
150 125 146
94
100
51 62
34
148 150
50 110 106 109

86 75
65 67 64 68
0
12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 6/1/2017

Investor Preference
Sectors that Investors View as Presenting the Best Opportunities
Energy (Excl. Renewables) 49%

Renewable Energy 46%
Transport 44%
Utilities 37%
Telecommunications 28%
Waste Management 18%
Social 13%
0% 10% 20% 30% 40% 50% 60%
Strategies that Investors View as Presenting the Best Opportunities
Core 47%
Opportunistic 36%
Core-Plus 36%
Value Added 28%
Fund of Funds 14%
Debt 12%
Secondaries 9%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Source: Preqin Investor Interviews, December 2017

Open-Ended Infrastructure Fund Launches
60
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
No. of Funds Already in Market No. of Funds Launched No. of Funds Liquidated
Source: Preqin Infrastructure Online

Key Challenges Facing Private Real Estate
Managers in 2018
Valuations 62%
Deal Flow 37%
Interest Rates 33%
Performance 24%
Exit Environment 19%
Fundraising 19%
Regulation 16%
Availability/Pricing of Debt Financing 15%
Fulfilling Investor Demands 11%
Fee Pressure 10%
0% 10% 20% 30% 40% 50% 60% 70%

Source: Preqin Fund Manager Survey, November 2017

Index Return
(Rebased to 100 as of 31-Dec-2007
0
100
150
200
250
50
12/1/2007
3/1/2008
6/1/2008
9/1/2008

12/1/2008
3/1/2009
Source: Preqin Real Estate Online
PrEQIn Real Estate
6/1/2009
9/1/2009
12/1/2009
3/1/2010
6/1/2010
9/1/2010
12/1/2010
3/1/2011
PrEQIn Private Equity

6/1/2011
9/1/2011
12/1/2011
3/1/2012
6/1/2012
9/1/2012
12/1/2012
3/1/2013
PrEQIn Infrastructure
6/1/2013
9/1/2013
12/1/2013
3/1/2014
6/1/2014
9/1/2014
12/1/2014
3/1/2015
PrEQIn Private Debt
6/1/2015
9/1/2015
12/1/2015
3/1/2016
6/1/2016
9/1/2016
MSCI US REIT
12/1/2016
3/1/2017
6/1/2017
Performance: PrEQin Index by Asset Class
Real Estate: Public Market Equivalent (PME)
1.3
If PME value (X) is >1, private
real estate has outperformed
the public market
1.2
1.1
PME Value (X)
0.9
0.8
0.7
0.6
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
KS PME Using MSCI US REIT KS PME Using S&P 500 TR
Source: Preqin Real Estate Online, All Regions

Yield
0
2
4
6
8
10
12
1/1/2001
5/1/2001
9/1/2001
1/1/2002
5/1/2002
9/1/2002
1/1/2003
5/1/2003
9/1/2003

1/1/2004
5/1/2004
9/1/2004
1/1/2005
5/1/2005
9/1/2005
1/1/2006
5/1/2006
9/1/2006
Source: CAIA and Bloomberg. Data through December 2017

Spread
1/1/2007
5/1/2007
9/1/2007
1/1/2008
5/1/2008
9/1/2008
1/1/2009
5/1/2009
US Avg. Cap Rate

9/1/2009
1/1/2010
5/1/2010
9/1/2010
1/1/2011
5/1/2011
9/1/2011
1/1/2012
US 10 Year Yield
5/1/2012
9/1/2012
1/1/2013
5/1/2013
9/1/2013
1/1/2014
5/1/2014
9/1/2014
1/1/2015
5/1/2015
9/1/2015
1/1/2016
5/1/2016
9/1/2016
1/1/2017
US Average Cap Rate vs. US 10 Year Yield
5/1/2017
9/1/2017
Closed-End Private Real Estate AUM
900
800
700
600
575 565
500 542
555
504
400
395 456
300 297
243 229 216
200 144
92
228 238 245
100 201 195
68 165 169 176 164
58 130 150 136
42 39 96
43
36 38 38 54
0 20

Closed-End Private Real Estate Dry Powder by
Strategy
120
100
80
60
40
20
0
12/1/2007 12/1/2008 12/1/2009 12/1/2010 12/1/2011 12/1/2012 12/1/2013 12/1/2014 12/1/2015 12/1/2016 12/1/2017
Debt Core Core-Plus Value Added Opportunistic Distressed

The CAIA Charter
The Global Benchmark In Alternative
Investment Education
September 2018 Exam

Global Presence
Member Asset Class Focus and Regional Distribution
CAIA Members work across a variety of asset classes globally.
Hedge Funds 65%
Fixed Income Alternatives 50%
Private Equity 45%
Real Estate 41%
Commodities 39%
Managed Futures 32%
Real Assets Infrastructure, Farmland,

Timberland 30%
Structured Products 29%
Venture Capital 18%
0 18 35 53 70
Americas
32%
Asia-Pacific
55%
Europe, Middle-East, Africa
13%
Data: Member Survey, May 2017

Membership Growth
10,000
9,000
8,000
6,000
5,700
4,000
3,265
2,000
561
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
*2017 Data through May 2017

Level I Curriculum – Third Edition
Core Concepts
 Professional Standards & Ethics
 Introduction to Alternative
Investments
 Real Assets
 Hedge Funds
 Private Equity
 Structured Products
 Risk & Portfolio Management
Level II Curriculum – Third Edition
Advanced Core Concepts

 Professional Standards & Ethics
 Venture Capital & Private Equity
 Hedge Funds & Managed Futures
 Real Estate/Real Assets
 Commodities
 Structured Products Current & Integrated
Topics Available
 Manager Selection, Due Diligence & Free at
caia.org
Regulation
 Research Issues & Current Topics
 Risk & Risk Management
 Asset Allocation & Portfolio
Management
Level I Exam Topics
Approximate Exam
Level I Topic
Weight
Professional Standards and Ethics 15% – 20%
Introduction to Alternative Investments 20% – 25%
Real Assets including Commodities 10% – 20%
Hedge Funds 10% – 20%
Private Equity 5% – 10%
Structured Products 10% – 15%
Risk Management and Portfolio Management 5% – 10%

Level II Exam Topics
Level II Topic Approximate Exam Weight
Multiple Choice Constructed Response
Professional Standards and Ethics 0% 10%
Current and Integrated Topics 0% 10%
Asset Allocation and Institutional Investors 8-12% 0-10%
Private Equity 11-15% 0-10%
Real Assets 13-17% 0-10%
Commodities 5-7% 0-10%
Hedge Funds and Managed Futures 18-22% 0-10%
Structured Products 5-7% 0-10%

Examination Format and Scheduling
Level I Level II
Section 1: 100 questions / 120 minutes Section 1: 100 questions / 120 minutes
Section 2: 100 questions / 120 minutes Section 2: 3 essays / 120 minutes
Once you have purchased your Level I or

Both CAIA exams are administered
Level II exam, you will receive a
internationally in computerized format
confirmation email with a link that will
exclusively at proctored Pearson VUE
allow you to schedule your exam
test centers.
appointment.
Candidate Support & Tools
 Study guides outlining keywords and learning objectives

 Workbooks with sample exercises
 Candidate orientation sessions
 Study calculator to plan your course of study
 Third party preparatory course and programs
 Level I & Level II sample exams
Visit CAIA.org/preparing
Fees
Fees (in USD) Level I Level II Annual Membership (in USD)
Program Enrollment $400 Full $350
Exam Registration $1,250 $1,250 Affiliate $175
TOTAL $1,650 $1,250 Retired $175
Emerging Market* $100
Early Registration Discount -$100 -$100 2-Year Full $650
Retake Fee $450 $450
Curriculum cost (in USD) Level I Level II
Textbook & readings $125 $125
Standards of Practice handbook $0 $0 * Based on MSCI Emerging Market

Indices
Pass Rates
90%
70% Level I
70% 68%
67% 66% 66% 66% 67% 66% Level II
63%
61% 60%
59% 59%
57%
50%
CAIA Charter
Academic Partnerships - Americas
Academic Partnerships - EMEA
A complete list of CAIA’s academic partners globally can be found at caia.org.

Academic Partnerships - APAC
A complete list of CAIA’s academic partners globally can be found at caia.org.

Association Partnerships
Sample Employers
Pension Funds &

Banks Consultants Fund Managers Regulators
Endowments
Cambridge APG
HSBC Blackrock U.S. SEC
Associates
Citi Goldman Sachs MAS Singapore Teacher Retirement
Credit Suisse New England J.P. Morgan SFC Hong Kong System of Texas
Pension Consultants
UBS Morgan Stanley FCA UK Chicago Teachers
Mercer
Barclays Capital State Street CIMA Cayman Ontario Teachers
Willis Towers Watson CalPERS
Deutsche Bank
Harvard
Management Co.
CAIA is Preferred
Top companies seek to hire CAIA Charterholders.

Sample job postings from the CAIA Career Center
Risk Management - Associate International Relationship Senior Quantitative Research

Industry certifications, such as a Manager. CFA, CAIA or working Analyst. CFA, CAIA, CIMA
CFA, CAIA, or FRM, are a plus. toward preferred.
Equity Investment Research - International Trading Manager Senior Credit Specialist

Manager. CIMA, CAIA, and/or MBA, CFA, CAIA or CMT preferred CFA / CAIA / FRM / PRM is
CFA charter holders or candidates considered highly advantageous.
will be looked favorably upon.
Career Value of the CAIA Charter
Why maintain an active CAIA membership? Top 5 reasons from Members:
1 To use the CAIA designation.
To take advantage of CAIA Chapters’

educational and social events.
2
To maintain my knowledge of alternatives and
stay current in the industry through CAIA
3 publications and research.
To position myself for future career opportunities

4 and access the CAIA Career Center.
To access CAIA benefits through

5 Member News and volunteer opportunities.
Data: Member Survey, May, 2017

Member Benefits
 Use of CAIA marks in professional documents

 Chapter educational and networking events
 Global network of more than 9,000 Members
 Globally-recognized designation
 Education and Research at CAIA.org
 Self-evaluation Tool
 Ongoing Education
 CAIA Career Center
Exams September 2018 – Notable Dates
APR MAY JUNE JULY AUG SEPT
Early Regular
Level I Exam
Registration Registration Sept 3 – 14, 2018
Apr 2 – May 14, 2018 May 15 – Aug 6, 2018
Level II Exam
Sept 17 – 28, 2018
Global Business Development Contacts
AMERICAS ASIA-PACIFIC EUROPE, MIDDLE-EAST, AFRICA

Millissa Allen, CAIA Joanne Murphy Laura Merlini, CAIA
Amherst Hong Kong Geneva
Managing Director of Managing Director, APAC Managing Director of Business Development
Business Development direct: +852 3752 0495 direct: +41 796 154 491
direct: +1 413 549 3324 jmurphy@caia.org lmerlini@caia.org
mallen@caia.org
Tammy Johnston
Cody Durant Wendy Leung London
Amherst Hong Kong Global Business Development Associate
Business Development Manager Assistant Director, APAC tjohnston@caia.org
direct: +1 413 549 3313 direct: +852 3752 0495
cdurant@caia.org wleung@caia.org
Peter Douglas, CAIA

Singapore
Principal
direct: +65 6536 4241
pdouglas@caia.org
The CAIA Charter
The Global Benchmark In Alternative
Investment Education
www.caia.org
ALTERNATIVE INVESTMENTS SUMMIT
MAY 7TH 2018
Speaker:
Keith Black, PhD, CFA, CAIA (Managing Director, CAIA)
Panel:
Dan Schwartz, CFA (Vice President, AQR)
Eileen Duff (Managing Partner, iCapital)
David Hemming (Senior PM, PowerShares by Invesco)

Alternative Investments

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Alternative Investments

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ALTERNATIVE INVESTMENTS SUMMIT

MAY 7TH 2018

CFA Society Orlando was founded in 1993

MISSION: Our mission is to foster a vibrant

CFA Society Orlando 2

CFA Society Orlando

CFA Society Orlando 33

CFA Society Orlando 4

CFA Society Orlando 5

Showcase your Knowledge @CAIA_Keith Black

The global leader in alternative investment education

State of Alternative Investment – 7

Alternatives currently represent over $14 trillion in assets

The CAIA Association Mission:

State of Alternative Investment – 8

 Globally recognized credential for professionals

State of Alternative Investment – 9

The Fundamentals of Alternative Investments certificate

 Online, 20-hour, self-paced course

State of Alternative Investment – 10

S&P 500 P/E Ratio

Source: CAIA and Bloomberg. Data through February 2, 2018.

State of Alternative Investment – 11

German Bund 10 Year US 10 Year

State of Alternative Investment – 12

MSCI World 18.2% 11.0% 4.2% 17.1% -49.0%

Bloomberg Commodities -0.3% -10.5% -6.8% 19.7% -65.9%

State of Alternative Investment – 13

 Should projected returns

State of Alternative Investment – 14

Source: 2016 Estimates from Aon Hewitt, HFR, Barclays, Preqin

State of Alternative Investment – 15

Source: Preqin Investor Outlook: Alternative Assets, H1 2018

State of Alternative Investment – 16

Source: Preqin Investor Outlook: Alternative Assets, H1 2018

State of Alternative Investment – 17

 The largest endowments have average allocations of:

2002 2004 2006 2008 2010 2012 2014 2016 2017

Source: NACUBO-Commonfund Study of Endowments, 2017

State of Alternative Investment – 18

90% 15.4% 16.2%

State of Alternative Investment – 19

Source: Preqin 2016

State of Alternative Investment – 20

Perception of Industry by Public 38%

Volatility/Uncertainty in Global Markets 38%

Portfolio Management 13%

Notable Investors Exiting Asset Class 3%

Source: Preqin Investor Outlook: Alternative Assets, H1 2018

State of Alternative Investment – 21

State of Alternative Investment – 22

Source: LuxHedge Database. Data as of December 31, 2017

State of Alternative Investment – 23

Source: CAIA and Morningstar

State of Alternative Investment – 24

State of Alternative Investment – 25

Alternative Total Hedge Fund

State of Alternative Investment – 27

Single-Manager Funds Fund of Funds

State of Alternative Investment – 28

By # of Firms By Firm AUM Size

State of Alternative Investment – 29

3 Year Rolling Correlation with S&P 500 Index

$2.50 0.91 - Technology