Alternative investments could be return-enhancing: CAIA’s Keith Black

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The Chartered Alternative Investment Analyst (CAIA) Association is a global organisation offering education programme for individuals specialising in institutional-quality alternative investments. Keith Black, Managing Director, Curriculum Exam, CAIA Association, shared his views with Moneycontrol on some aspects of alternative investment. Excerpts:

What are the benefits of investing in alternative investments? Are these investment mainly for high net-worth individuals?

Alternative investments can serve different roles in a portfolio, either return enhancers or risk reducers.  Some investments, such as private equity and venture capital, have high expected returns.  Allocating assets to these return-enhancing investments increase the expected return on the portfolio.  Most other alternative investments, such as commodities or hedge funds, serve roles as diversifiers in a portfolio.  That is, the return to commodity investments are driven by different risk factors than are stocks and bonds, where stocks and bonds may be negatively affected by inflation while commodities can benefit during times of increased inflation.

 

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