Alternative Investments. Accounting, Finance, SPSS Essay (Essay Sample)
This is a finance assignment.
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Choose 2 “Alts,” or Alternative Investments, to research and analyze.
Describe their investment objectives, strategy, and recent (3 or 5 year) performance. Review and interpret at least 2 – 3 risk adjusted return measures, or ratios, that we’ve covered in class (Volatility, Sharpe Ratio, Treynor Ratio, Alpha, Beta, etc..) applied to your Alts. Assess how you feel adding a 5 – 10% allocation of these Alts can improve a traditional stock and bond portfolio.
Finally, compare and contrast the 2 Alts in terms of performance, risk and ability to diversify an investment portfolio. Focus also on why you believe these Alternative Investments are highly un-correlated to an existing stock and bond portfolio.
• 2 – 3 double-spaced pages, MLA format (1 paper per team)
• Include a mix of theory and practical, actual examples of your Alternatives.
• Choose either from this initial list of Alts, or others you see in your research:
- Long / Short (hedge) fund
- Private Equity funds
- Venture Capital funds
- Commodities – Oil, Gold, agriculture futures (these can count for 2 Alts, ex: Oil and Gold).
- Covered Call fund
- Cryptocurrrency fund
- Foreign currency fund
- Convertible arbitrage fund
- Capital events driven fund
- Catastrophe (“Cat”) bonds
Unit Name & Number:
Date of Submission:
My alternatives are Long / Short (hedge) funds and Private Equity funds.
Long / Short (hedge) fund
It is an investment strategy that involves selling equities anticipated to decrease in value, and those that increase in value are bought. A long/short equity strategy focuses on minimizing various market exposures while earning profits from equities bought but balancing with losses from equities sold after their value declined(Guides, 2019). This alternative is common with hedge funds, although many investors prefer a market-neutral strategy whereby the value of equities sold is equal to the value of equities bought.
The performance of the fund in the last five years has been good. The reason is the fund recovered losses in 2019 for the worst losses suffered in 2018; hence there has been an improvement of over 5 % per year.
This fund's primary investment objective is to find investments expected to rise and those that fall and invest in both, intending to maximize potential returns. For instance, a fund manager may take $100 and invest in equities expected to do well. He will then use the same equity to open equities expected to fall, and when he receives cash, for instance, $30, he will reinvest the cash in equities expected to increase in value. Hence he will have a $160, $130 positive portfolio, and a $30 negative portfolio.
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