30187 - ALTERNATIVE INVESTMENTS
Course taught in English
Go to class group/s: 31
Class-group lessons delivered on campus
Alternative investments are among the fastest growing sector of the investment industry. In recent years, we have seen increasing demand for non-traditional investments as institutional and private investors seek absolute-return strategies targeting a positive return in all market environments and maintaining low correlations with traditional asset classes. This has led to the development of the alternative investment industry. The course aims to provide an in-depth understanding of the alternative investment techniques available to private and institutional investors in a globalized market. The emphasis is on the following asset classes: Hedge Funds and liquid alternatives, Real Estate, and Art and other collectibles. Asset classes will be examined in terms of the following aspects: key characteristics, investment strategies, and portfolio consideration (risk/return profile and their contribution to portfolio diversification).
Main topics/asset classes covered:
- What are alternative investments? Definition and key characteristics.
- The AI environment: investors typologies and regulatory framework.
- Real Estate.
- Investments of passion (art and other collectibles).
- Hedge Funds and liquid alternative investments.
- Characterize the common features of alternative investments and their markets.
- Identify the specificities of different alternative assets.
- Understand the benefits (e.g., return enhancement and/or risk diversification), and pitfalls of adding an alternative investment to a reference portfolio.
- Identify main hedge funds strategies.
- Measure risk/return profile of alternative assets and build up optimal portfolios by using both traditional and non traditional asset classes.
- Assess and choose among different alternative assets by using both qualitative and quantitative metrics.
- Measure basic hedge funds performance in different market conditions.
- Advise a potential client on how to incorporate alternative investment in his/her portfolio according to his/her investment objectives and risk tolerance.
- Think critically, interact with their peers and defend their position.
- Face-to-face lectures
- Guest speaker's talks (in class or in distance)
- Exercises (exercises, database, software etc.)
- Case studies /Incidents (traditional, online)
- Group assignments
- Face-to-face lectures.
- Case studies (e.g. the Madoff and the LTCM cases).
- Guest speakers from the industry (there is one guest speaker for type of alternative asset class).
- Group assignment aimed to propose an optimal asset allocation taking into account certain investor's characteristics.
- Exercises to build up optimal asset allocations by using Excel solver.
With the purpose of measuring the acquisition of the above-mentioned learning outcomes, attending students’ assessment is based on two main components:
- Individual written exam (two partial exams or one general exam, at their choice)
- Group assignment (written paper + oral presentation)
- The written exam consists of multiple choices questions and exercises aimed to gauge students’ ability to recognize the specificities of alternative assets and evaluate these assets by using both qualitative and quantitative metrics (e.g., by measuring hedge funds performance).
- The group assignment asks students to create an asset allocation plan for a hypothetical investor on the basis of the investor’s characteristics, the expected macro-economic scenario, and portfolio management decisions (asset allocation and asset management style). Based on these, students are asked to define, motivate and describe in detail the alternative component of their asset allocation and its impact on the portfolio risk/return profile. As such, the group assignment enables to assess students’ ability to choose among different assets based on qualitative and quantitative aspects and advise potential clients on whether and how incorporate alternative assets in their investment portfolio. Specifically, the oral presentation enables to gauge students’ ability to think critically as well as to motivate and defend their position in front of their peers and the instructors.
- The final grade is sum of the individual written exam score and the group assignment score.
Non-attending students are asked to take an individual written exam (two partial exams or one general exam, at their choice). The written exam consists of multiple choices questions and exercises aimed to gauge students’ ability to recognize the specificities of alternative assets and evaluate these assets by using both qualitative and quantitative metrics.
There are no required textbooks. Required readings, PowerPoint slides used in class, and any additional material are made available in Bboard.
The books below (which are not compulsory material) may provide helpful additional information on traditional and alternative investment vehicles, as well as on risk / return indicators and investment analysis:
- ANSON, FABOZZI, JONES, The Handbook of Traditional and Alternative Investment Vehicles, Wiley & Sons, Inc, 2011.
- SOKOLOWSKA, The principles of alternative investment management, Springer 2016.
- CAIA, Alternative investments Level I, 3rd Edition.