TYPES OF ALTERNATIVE FUNDS
There are a number of different types of alternative funds, each with their own characteristics and level of risk.
These funds typically invest in tangible assets that derive their value from their substance and physical properties. Real assets include real estate, public and private infrastructure, natural resources, precious metals, and commodities.
These funds typically invest in land plus anything permanently fixed to it, including buildings, through direct investment, partnerships, or real estate investment trusts (REITs). Property types include commercial and corporate facilities in addition to raw land, multifamily residential properties, and farm land.
These funds typically invest in basic physical systems owned and operated by governmental entities and businesses. These projects can include transportation, communications, water and sewage, and electric systems that are vital to economic development and prosperity.
Also referred to as alternative strategies, these investment strategies use both long and short positions in markets and securities as well as derivatives in an attempt to minimize market beta returns while seeking alpha and risk-adjusted returns. Some of the most common strategies are long and short equity, global macro, relative value, and credit.
Private equity funds typically invest in equity capital that is not quoted on a public exchange. Instead, the funds take direct ownership positions in private companies, which potentially may provide above-market returns and control of the investment, at the risk of reduced liquidity and diversification.
Private debt funds typically invest in non-listed debt issues, including bonds, notes, and loans issued by private companies. As with private equity, private debt positions may potentially provide greater returns and control than what is available in the public markets, but with reduced liquidity.
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