30187 - ALTERNATIVE INVESTMENTS
Course taught in English
Go to class group/s: 31
Students attending this course are expected to be familiar with the basic concepts of probability, statistics, financial markets and investments.
Since the great financial crisis in 2008, Alternative Investments have been among the fastest growing asset classes within the investment industry. A low interest rate environment coupled with dramatic shifts in financial markets has boosted the demand for non-traditional investments. As a result, investors have increasingly looked for absolute-return strategies providing positive returns in different market conditions, while keeping a low correlation with traditional assets. This trend has accelerated as a consequence of the COVID emergency: the rapid expansion of new industries such as Technology, Green Energy, and E-commerce, has been mainly driven by capital allocation through Private Markets. Against this background, the course aims to provide an in-depth understanding of the main alternative assets and investment strategies employed by private and institutional investors globally. The emphasis is on the following macro classes: (i) Public Markets/Liquid assets, such as Hedge Funds and liquid alternatives; and (ii)Private Markets/Illiquid assets, such as Private Debt and Private Equity, Real Estate and Art, Sustainable Investments (ESG). Asset classes will be examined in terms of the following aspects: key characteristics, investment strategies, and portfolio consideration (alternative risk premia and contribution to portfolio’s performance). This is an Engage Course within the CIVICA Bachelor Engage Track developed within the framework of the CIVICA alliance.
Main topics/asset classes covered:
What are alternative investments? Definition and key characteristics.
Hedge funds and liquid alternatives: Investors typologies and regulatory framework.
Illiquid alternatives: Private debt (focus on structured and distressed debt).
Illiquid alternatives: Investments of passion (art and other collectibles).
Illiquid alternatives: Private equity and venture capital
Illiquid alternatives: Real estate and infrastructure
Liquid & Illiquid: sustainable investments and ESG criteria
Asset Allocation Plan: why alternatives matter in portfolio construction
- 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.
- 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 Yale endowment).
- Guest speakers from the industry (ideally, one guest speaker for type of alternative asset class).
- Exercises to build up optimal asset allocations by using Excel solver.
- Group Assignment: a (non-mandatory) workgroup to be carried out throughout the cours. The purpose of this on-going exercise is to build up a real asset allocation plan according to the specific needs and requirements of institutional investors.
|Continuous assessment||Partial exams||General exam|
Students are required to take an individual exam (general exam / two partial exams) in the form of multiple choice questions that are constructed in a way to enable the assessment of basic knowledge and concepts regarding the distinctive features of alternative assets as opposed to traditional asset classes.
On a voluntary basis, students may also complete one group assignment, requiring the preparation of an asset allocation plan, based on certain characteristics of the investor and macro scenario assumptions. The group assignment entails the preparation of a short paper, a recorded video and an oral presentation. As such, the group assignment aims to gauge multiple skills, which include critical thinking and ability to make connections (e.g., understanding of the implications of investor risk/return profile and macro scenario assumptions on the asset allocation), writing abilities (e.g., accuracy, clarity, and conciseness of concepts, is the paper well organized and well structured), presentation skills (e.g., ability to communicate concisely the results of the work and defend the conclusions reached), along with teamwork skills.
Required readings, PowerPoint slides used in class, and any additional material are made available in Bboard.
The books below (which are not compulsory) may provide helpful additional information on traditional and alternative investment vehicles, as well as on risk / return indicators and investment analysis:
- CAIA, Alternative investments Level I, 3rd Edition.
- ANSON, FABOZZI, JONES, The Handbook of Traditional and Alternative Investment Vehicles, Wiley & Sons, Inc, 2011.
- SOKOLOWSKA, The principles of alternative investment management, Springer 2016.