REVIEW QUESTIONS & ANSWERS - Chapter 1
An investment is that it is deferred consumption. Any net outlay of cash made with the prospect
of receiving future benefits might be considered an investment.
Define alternative investment?
Alternative investments are sometimes viewed as including any investment that is not simply a
long position in traditional investments.
Define traditional investment?
Traditional investments include publicly traded equities, fixed-income securities, and cash.
2. List four major types of real assets other than land and other types of real estate?
• Natural resources, commodities, infrastructure and intellectual property
3. List the three major types of alternative investments other than real assets in the CAIA
• Hedge Funds, Private Equity, Structured Products
4. Name the assets that are often characterized as traditional by some and as alternatives by
others for each of the following categories: hedge funds, private equity and real assets?
• Hedge Funds - liquid alternative mutual funds
• Private Equity - closed-end funds with illiquid holdings
• Real Assets - public real estate and public equities of corporations with performance
dominated by stable positions in real assets
5. Approximately when did average-quality corporate bonds and international equities
become commonly viewed as institutional-quality investments in the United States?
• Between 1950 to 1980
6. Name the four return characteristics that differentiate traditional and alternative
• Diversification, Illiquidity, Inefficiency, Nonnormality
7. Name four major methods of analysis that distinguish the analysis of alternative
investments from the analysis of traditional investments?