CAIA Level I: An Introduction to Core Topics in Alternative Investments (Wiley Finance)

662 Pages·2009·1.18 MB·English

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$195.00 USA/$234.00 CAN
C AlA
• A ddresses the unique attributes associated with
the alternative investment space
• Offers a study guide outlining learning
objectives and keywords, available at
www.caia.org/program/studyguides LEVEL 1
A
Since its inception in 2002, the CAIA program’s
n
diverse curriculum has benefi ted a wide array of s Success in today’s complex world of alternative in-
individuals—from institutional investors, investment o C AlA vestments (AI) demands a strong foundation of
advisors, AI fund managers, and administrators to ac- n knowledge and an unwavering dedication to profes-
The official reading for the
countants, lawyers, and academics. So if you’re ready sionalism. But up until a few years ago, no structured
to take your fi rst step toward the CAIA charter, take program existed to address these needs.
CAIA Level I exam
the time to understand the insights offered here. C
Sponsored by the CAIA Association®, the Chartered
LEVEL 1
Don’t forget to pick up CAIA Level II: Advanced Core Alternative Investment Analyst (CAIA) designation
Topics in Alternative Investments to prepare for the A is the only educational standard uniquely designed
second, and fi nal, exam needed to achieve the CAIA “The book is an excellent blend of theory with practical examples and case studies.” for individuals specializing in alternative investments.
charter. Covering hedge funds, real estate, private equity,
—Jane Buchan, Managing Director and CEO, PAAMCO l commodities and managed futures, and credit deriva-
THE CAIA ASSOCIATION is an indepen- A
tives, the CAIA charter demonstrates one’s commit-
dent, not-for-profi t, global organization committed to
ment to professionalism and command of AI’s unique
education and professionalism in the fi eld of alter-
Sponsored by the CAIA Association®, the Chartered Alternative Investment Analyst (CAIA) fundamentals—setting you and your fi rm apart from
native investments. It offers two exams (Level I and An Introduction to
program consists of a two-tier exam process (Level I and Level II) through which you may the competition.
Level II) to professional analysts in this growing fi eld L
earn the CAIA charter. The Level I exam challenges your understanding of the alternative
so that, upon successful completion, the individuals Core Topics in The CAIA program is comprised of a two-tier
hold the Chartered Alternative Investment Analyst investment market’s tools and terms, and tests your knowledge of various trading strategies E exam process (Level I and Level II) through which
(CAIA) designation. This certifi cation has a great deal and their performance characteristics. you may earn the CAIA charter. The Level I exam
Alternative Investments
of prestige in the global community with members V challenges your understanding of the alternative
from over sixty countries. CAIA Level I: An Introduction to Core Topics in Alternative Investments contains virtually all the investment market’s tools and terms, and tests your
material on alternative investments that potential Level I candidates would need to know as
E knowledge of various trading strategies and their
they prepare for the exam. The information found here will provide you with a broad foun- performance characteristics.
MARK J.P. ANSON is the President and Ex-
dation of knowledge related to alternative vehicles such as hedge funds, private equity, com- L
ecutive Director of Investment Services at Nuveen
CAIA Level I: An Introduction to Core Topics in Alternative In-
Investments. Previously, he was the chief executive modities and managed futures, and credit derivatives. With this book as your guide, you’ll not
vestments contains virtually all the material on alternative
offi cer of Hermes Pensions Management Ltd. Before only become familiar with the fundamentals of each product, but also discover their unique
1 investments a potential Level I candidate would need
joining Hermes, Anson was the chief investment of- risk and return attributes.
to know as they prepare for the exam. The informa-
fi cer of the $245 billion California Public Employees’
tion found here will help you build a solid founda-
Retirement System (CalPERS)—the largest pension Whether you’re a seasoned professional looking to explore new areas within the alternative AtoA
l n tion in alternative investment markets—for example,
fund in the United States. Anson is the author or co- investment arena or a new industry participant seeking to establish a solid understanding of te C I the characteristics of the many types of strategies
author of four fi nancial books, including the Hand- alternative investments, CAIA Level I: An Introduction to Core Topics in Alternative Invest- ron
n t within each alternative asset class, and how statistics
book of Alternative Assets (Wiley). He has published ments is the best way to achieve these goals—and the smartest way to prepare for such a atrero are used to measure investment performance on a
over eighty research articles on topics ranging from demanding exam. ive Todu stand-alone basis as well as in a portfolio context.
alpha and beta separation to corporate governance. pc
Don’t forget to pick up CAIA Level II: Advanced Core Topics in Alternative Investments to Inicti A required reading for one of today’s most demand-
vso
Jacket Photograph: © moodboard/Corbis prepare for the second, and fi nal, exam needed to achieve the CAIA charter. es inn ing exams, this comprehensive resource:
t
m
• Uses investment analytics to examine each
e
n alternative asset class
t
s • Focuses on quantitative techniques used by
Mark J. P. Anson investment professionals
Chartered Alternative Investment Analyst Series
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CAIA Level I
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Foundedin1807,JohnWiley&SonsistheoldestindependentpublishingcompanyintheUnited
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CAIA Level I
An Introduction to Core Topics in Alternative Investments
Mark J. P. Anson
The CAIA Association

JohnWiley&Sons,Inc.
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Copyright(cid:1)C 2009byTheCAIAAssociation.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
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LibraryofCongressCataloging-in-PublicationData:
CAIAAssociation.
CAIAlevelI:anintroductiontocoretopicsinalternativeinvestments/theCAIAAssociation.
p.cm.—(Wileyfinanceseries)
Includesindex.
ISBN978-0-470-44702-4(cloth)
1.Investments. 2.Securities. 3.Portfoliomanagement. I.Title. II.Title:CAIAlevelone. III.Title:CAIA
levelI.
HG4521.C242009
332.63(cid:2)2—dc22
2009021621
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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Contents
Preface ix
PARTI INTRODUCTIONTOALPHADRIVERSANDBETADRIVERS 1
1 WhatisanAlternativeAssetClass? 3
2 WhyAlternativeAssetsAreImportant 11
3 TheBetaContinuum 23
4 AlphaversusBeta 35
5 TheCalculusofActiveManagement 47
PARTII REALESTATE 67
6 RealEstateInvestmentTrusts 69
7 IntroductiontoNCREIF andtheNCREIFIndexes 81
8 RealEstateasanInvestment 91
9 Core,Value-Added,andOpportunisticRealEstate 105
PARTIII HEDGEFUNDS 117
10 IntroductiontoHedgeFunds 119
11 EstablishingaHedgeFundInvestmentProgram 151
12 DueDiligenceforHedgeFundManagers 169
v
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vi Contents
13 RiskManagementPartI:HedgeFundReturnDistributions 203
14 RiskManagementPartII:MoreHedgeFundRisks 231
15 HedgeFundBenchmarksandAssetAllocation 255
16 HedgeFundIncentiveFeesandtheFreeOption 273
17 HedgeFundCollapses 287
18 TopTenHedgeFundQuotes 297
PARTIV COMMODITIESANDMANAGEDFUTURES 307
19 IntroductiontoCommodities 309
20 InvestinginCommodityFutures 329
21 CommodityFuturesinaPortfolioContext 353
22 ManagedFutures 367
PARTV PRIVATEEQUITY 387
23 IntroductiontoVentureCapital 389
24 IntroductiontoLeveragedBuyouts 419
25 DebtasPrivateEquityPartI:MezzanineDebt 449
26 DebtasPrivateEquityPartII:DistressedDebt 469
27 TrendsinPrivateEquity 489

28 TheEconomicsofPrivateEquity 509
PARTVI CREDITDERIVATIVES 527
29 IntroductiontoCreditDerivatives 529
30 CollateralizedDebtObligations 551
31 RisksandNewDevelopmentsinCDOs 575
AppendixA:BasicPrinciplesofReturnandPresentValue 593
AppendixB:MeasuresofRiskandRiskManagement 601
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Contents vii
AppendixC:CorrelationandRegressionAnalysis 617
AppendixD:TheQuantitativeAnalysisof130/30Products 629
AbouttheAuthors 633
Index 635
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