INTRODUCTION TO

ALTERNATIVE INVESTMENT
Dr. Manara Abdelaziz Toukabri
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ALTERNATIVE INVESTMENTS

 Alternative investments” is a label for a disparate group of

investments that are distinguished from long- only, publicly
traded investments in stocks, bonds, and cash.
 The terms “traditional” and “alternatives” should not be
construed to imply that alternatives are necessarily
uncommon or relatively recent additions to the investment
universe.
 Alternative investments include investments in such assets as
real estate and commodities, which are arguably two of the
oldest investment classes.
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ALTERNATIVE INVESTMENTS

 Alternative investments are not free of risk, and their returns

may be correlated with those of other investments, especially
in periods of financial crisis.
 During periods of economic crisis, such as late 2008,
correlations among many assets (both alternative and
traditional) can increase dramatically.
Categories of Alternative Investments:
 Hedge funds
 Private equity.
 Real estate.
 Commodities
 Infrastructure
 Other
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ALTERNATIVE INVESTMENTS
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ALTERNATIVE INVESTMENTS

 Hedge funds:
Hedge funds are private investment vehicles that manage portfolios
of securities and derivative positions using a variety of strategies.
They may use long and short positions and may be highly
leveraged, and some aim to deliver investment performance that is
independent of broad market performance
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ALTERNATIVE INVESTMENTS
 Private equity.:
Investors can invest in private equity either via direct invest-ment (including
co- investment) or indirectly via private equity funds.
Private equity funds generally invest in companies (either startup or
established) that are not listed on a public exchange, or they invest in public
companies with the intent to take them private. The majority of private equity
activity involves leveraged buyouts of established profitable and cash-
generative companies with solid customer bases, proven products, and high-
quality management. Venture capital, a specialized form of private equity,
typically involves investing in or providing financing to startup or early- stage
companies with high growth potential and represents a small portion of the
private equity market.
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 Commodities:
 Commodity investments may be in physical commodity products,
such as grains, metals, and crude oil, either through owning cash
instruments, using derivative products, or investing in businesses
engaged in the production of physical commodities. The main
vehicles investors use to gain exposure to commodities are
commodity futures contracts and funds benchmarked to
commodity indexes. Commodity indexes are typically based on
various underlying commodity futures
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 Infrastructure:
Infrastructure assets are capital- intensive, long- lived, real
assets, such as roads, dams, and schools, that are intended for
public use and provide essential services. Infrastructure assets
may be financed, owned, and operated by governments, but
increasingly the private sector is investing in infrastructure
assets.
An increasingly common approach to infrastructure investing is a
public–private partnership (PPP) approach in which governments
and investors each have a stake
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 Real estate.
Real estate investments may be in buildings and/or land,
including timberland and farmland, either directly or indirectly.
The growing popularity of securitizations broadened the
definition of real estate investing. It now includes private
commercial real estate equity (e.g., ownership of an office
building), private commercial real estate debt (e.g., directly issued
loans or mortgages on commercial property), public real estate
equity (e.g., REITs), and public real estate debt investments (e.g.,
mortgage- backed securities)
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 Other.
Other alternative investments include tangible assets (such as fine
wine, art, antique furniture and automobiles, stamps, coins, and
other collectibles) and intangible assets (such as patents and
litigation actions).