Year 3 · Applied Finance · Hedge Funds & Alternatives
Hedge Funds & Alternatives
Understand hedge-fund strategies, private markets, real assets and alternative risk premia through return drivers, liquidity, leverage, fees, due diligence and portfolio construction.
LEARNING OBJECTIVES
What you should be able to explain after this lesson
01
Distinguish major hedge-fund strategy families and their return drivers.
02
Understand how leverage, shorting and derivatives change hedge-fund risk.
03
Compare private equity, private credit, real estate, infrastructure and commodities.
04
Analyze alternative investments using liquidity, valuation and cash-flow characteristics.
05
Evaluate performance using alpha, beta, Sharpe, drawdown and downside metrics.
06
Understand management fees, performance fees, hurdle rates and high-water marks.
07
Conduct qualitative and quantitative manager due diligence.
CONCEPT MAPFrom strategy identification to allocation decision
Alternatives are defined more by structure and return source than by a single asset class
CORE FACTS · SAME IN EVERY MODE
Alternative investments include hedge funds, private equity, private credit, real estate, infrastructure, commodities and other non-traditional exposures.
Many alternatives trade liquidity for the possibility of differentiated return streams or illiquidity premia.
Alternative strategies can use leverage, short selling and derivatives more extensively than traditional long-only portfolios.
Diversification benefits depend on true economic exposures, not the label 'alternative'.
BeginnerTeaching style changes, knowledge does not.
Traditional portfolios usually focus on public stocks and bonds. Alternatives include investments or strategies that behave differently, such as private companies, private loans, real estate or hedge funds.
PROFESSIONAL VOCABULARYIlliquidity premium / illiquidity premium Alternative risk premium / alternative risk premium
Potential extra return demanded for holding assets that are difficult to sell quickly.
Systematic return source outside traditional long-only equity and bond beta.