Alternative investments
Although the alternative investment sector is very diverse and includes hundreds of different investment strategies, it is possible to group these strategies in investment styles, where each style represents a specific approach to investing. The following list shows some of the most predominant alternative investment styles.
Capital Structure Arbitrage
Focus on pricing inefficiencies within the capital structure of a company, i.e., pricing mismatches between different securities of the same company.
Collateralised Commercial Finance
In this style, loans are granted whereby a variety of assets are held as collateral. Examples are the financing of debtors, inventory and real estate. Interest proceeds are the main revenues, sometimes supplemented with investment specific revenues.
Convertible Arbitrage
Investments involving the convertible securities of a company. A typical investment is to be long the convertible bond and short the common stock of the same company. Positions are designed to generate profits from the fixed income security as well as the short sale of stock, while protecting the principal from market moves.
Currency Trading
Trading of currencies based on fundamental or technical models or discretionary judgment.
Emerging Markets
Investing in equity, debt, or trade claims of companies or government debt from geographical areas or countries with emerging economies. Profit potential generally originates from market participants? lack of understanding of the value of such securities and the risks involved.
Event Driven
?Special situations? investing designed to capture price movements generated by corporate events such as a merger, corporate restructuring, liquidation, bankruptcy or reorganization.
Fixed Income Arbitrage
Focus on price anomalies between related interest rate securities. Examples are interest rate swap arbitrage, US and non-US government bond arbitrage and forward yield curve arbitrage.
Fixed Income Trading
Trading of fixed income securities based on fundamental or technical models or discretionary judgment.
Global Macro
Trading based on views on market direction resulting from global macro-economic developments. Portfolios can include stocks, bonds, currencies, and commodities in the form of cash or derivative instruments in both developed and emerging markets.
Long/Short Equity
Equity-oriented investing on both the long and short side of the market. Shifting from value to growth, from small to medium to large capitalization stocks, and from a net long position to a net short position. Futures and options can be used in order to hedge different types of risk.
Managed Futures
Trading financial, commodity, and currency markets worldwide using derivative instruments. Managed Futures portfolio managers, typically referred to as Commodity Trading Advisers (CTAs), often use systematic, technical programs.
Market Neutral
Exploiting equity market inefficiencies by being simultaneously long and short equity portfolios of approximately the same size, usually in the same market or sector. An important characteristic of this style is that it aims to have no significant exposure to market direction.
Private Placements
Focus on investments in private companies, including start-ups, new ventures, acquisitions and expansions. These investments are often not available to the general public and do not trade publicly. Themes can include: management buy-out, development capital, and restructurings.
Real Estate
Investing in real estate. Return is generated from rental income as well as the increase in the value of property owned.
Statistical Arbitrage
Focus on exploiting pricing inefficiencies that are identified through the use of mathematical models. Statistical arbitrage attempts to profit from the tendency of prices moving towards their historical norm.
Volatility Arbitrage
Exploiting the disparities between derivatives resulting from the differences between the implied volatility levels of their underlying security.
Volatility Trading
Trading of volatility based on fundamental or technical models or discretionary judgment using options, warrant or swaps.