MindMap Gallery CFA_Level 1_Alternative Investment_2023 latest version
CFA, Level 1, Alternative Investments, the latest version of 2023 Alternative Investments, including Categories, Characteristics, and Compensation Structures, Performance Calculation and Appraisal, Private Capital, Real Estate, Infrastructure, Natural Resources, and Hedge Funds.
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This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
Alternative Investments
Categories, Characteristics, and Compensation Structures
Categories
Private Capital
Private equity (PE)
Venture capital (VC)
Formative stage
Pre-seed capital (angel investing)
Seed stage
Early stage (start-up stage)
Later stage financing (expansion VC)
Management selling control of company to VC
Mezzanine stage financing
prepare to go public
Growth capital
Leveraged buyouts (LBO)
Management buyouts (MBO)
current management team involved
Management Buy-ins (MBI)
Replace existing management
Exit strategies
Trade sale
Sale to strategic buyer, i.e. competitor
Initial public offering (IPO)
Sell to public investors
Special purpose acquisition company (SPAC)
Shell company
Recapitalization
issue debt to fund dividend
Secondary sales
Sale to another PE
Write-off/liquidation
Private debt
Categories
Direct lending
provide capital directly to borrowers
Venture debt
start-up or early stage companies
Mezzanine debt
senior secured debt
Distressed debt
company with financial difficulty, expect restructure and revive
Collateralized loan obligations (CLO)
pool and devide into tranches
Unitranche debt
combine into a single loan with single interest rate
Real estate debt/infrastructure debt
Specialty loans
Real Assets
Hedge Funds
Characteristics
Diversifying power
Higher expected returns
Illiquidity
Inefficiency
Investment method
Fund investing (indirect)
Investors unable to affect underlying investments
Co-investing
Possess rights (co-investment rights)
Direct investing
Great flexibility and control
Investment and compensation structure
Fund investing structure
General partner (GP)
Limited partners (LP)
Key partnership documents
Limited partnership agreements (LPAs)
Side letters
Compensation structures
Management fee
Performance fee
Hurdle rate
Hard hurdle rate
excess of the hurdle rate
Soft hurdle rate
entire annual gross return
Catch-up clause
High water mark
protect clients
Waterfall
Deal-by-deal (American) waterfalls
Whole-of-fund (European) waterfalls
Clawback provision
Performance Calculation and Appraisal
Performance appraisal
Common approaches
PE and real estate performance evaluation
Multiple of invested capital (MOIC) / money multiple
Quartile ranking
Cap rate
Hedge fund performance evaluation
Leverage
prime brokers
Illiquidity (mark to market problem)
Investor redemptions
Fees and returns
Custom fee arrangements
founders' shares
Either/or fee
1% management fee or 30% incentive fee above hurdle, whichever is greater
Private Capital, Real Estate, Infrastructure, Natural Resources, and Hedge Funds
Real Estate
Categories
Owner-occupied market
Rental properties
Private fund investing
Infinite-life open-end funds
Core real estate strategies
Core-plus strategies
Finite-life closed-end funds
Value-add investments
Opportunistic investing
Real estate investment trusts (REITs)
real estate index
Appraisal index
Subjective
Repeat sales index
Sample selection bias
REIT index
reliable
Infrastructure
Categories
By underlying assets
Economic infrastructure
Social infrastructure
By stage of development
bownfield investment
Greenfield investment
Forms
Direct investment
Indirect investment
Master Limited Partnerships (MLPs)
Natural resources
Commodities
Characteristics
Investment return based on change in price
Trade commodity derivatives
Commodity futures pricing
Future price = spot price (1 r) storage costs - convenience yield
Contango
futures prices higher than spot price, forward curve is upward sloping
Backwardation
futures prices lower than spot price, forward curve is downward sloping
Benefit
Hedge against inflation risk
Portfolio diversification
Risk
Supply and demand
Timberland and farmland
Characteristics
Timerland
Larger units
Flexibility
Return driver
Biological growth, change in spot prices and futures prices of cut wood
Farmland
much smaller sizes
hedge against inflation
Little flexibility
Return driver: harvest quantities, commodity prices, land price changes
Risk
Fixed costs are relatively high
Revenue based on weather
competition result in declines of prices
Hedge funds(100)
Characteristics
Lockup periods
soft lockup
Notice period
Goad of redemption restrictions is to increase hedge fund manager flexibility
Equity hedge strategies
Public equity markets
Market neutral
Long undervalued and short overvalued
Neutral to risk
Application of leverage
Stable, low-return portfolios
Fundamental L/S growth
Fundamental analysis
high growth
Fundamental value
Fundamental analysis to identify undervalued
Long biased, value biased and small-cap biased
Short biased
shorting overvalued
Sector specific
particular sector
Event-driven strategies
catalyst events
Merger arbitrage
Long company being acquired and short acquiring company
risk in failure
Distressed/restructuring
bankruptcy
Special situations
Activist
influence corporate
Relative value strategies
pricing discrepancy
Convertible bond arbitrage
market-neutral
purchase a convertible bond and short position in the underlying equity
Fixed income
General
sovereign debt and investment-grade corporate debt
Long-short trades
High yield
higher-yielding securities
Volatility
short-volatility strategy invloves selling options
Multi-stragegy
efficiently and quickly as conditions change
Macro and CTA strategies
Macro strategies
top-down
long and short positions on overall market direction
Managed futures funds (Commodity trading advisers, CTA)
diversified directional in futures markets