Alternative Investments Flashcards
(23 cards)
A REIT is considered to be hybrid if it invests in both?
Equity REITs and Mortgage REITS
How to calculate LTV
Mortgage liability/portfolio value
What can infrastructure investments be categorised as?
Economic or social
What are the three groupings of the infrastructure development cycle?
Greenfield, operational secondary stage and brown field
What are the risk profiles of each infrastructure development cycles
Secondary operational - less risky
Brown field - redevelopment of existing infrastructure
Green field projects - riskiest
What is backwardation?
Forward prices are lower than spot prices
What futures characteristic would be most expected in a period of low commodity inventories
Backwardation. Low inventories of a specific commodity creates incentives for market participants to own the physical commodity rather than the derivative contract. This drives up spot prices relative to forward prices
For something to be a better hedge what should it have a strong or weak correlation with inflation
Strong
What does co investing do regarding fees?
Lower fees
What does the general partner do?
Fund manager who makes all investment decisions
What do LPs do?
Investors who have no say in how the fund is managed
What is a side letter?
Special terms that apply to one partner but not to others
What is a master limited partnership
Fund structure that can be publicly traded
How are fees calculated for PE forums
Fee is calculated as a percentage of committed capital not invested capital
What is a soft hurdle rate
Performance fees are a percentage of the total increase in the value of each partners investment
What is a hard hurdle
Performance fees are based on gains above the hurdle rate
What is a catch up clause?
Similar to soft hurdle. Results in first gains going to LPs then to the GPs allowing the GP to catch up
What is a high water mark
Means no performance fee is paid on gains that only offset prior losses
What is a European waterfall
LPs receive all distributions until they have received 100% of their initial investment plus the hurdle rate
What is a clawback provision
Allows the LPs to recover the performance fees to the extent that subsequent losses negate prior gains on which performance fees had been paid
What is the formula for leverage rate of return
For merger arbitrage what happens gernally to the stock prices of each party
Acquirer stock price declines
Target company’s stock goes up
During times of higher inflation what natural resource investment has had the best performance?
Commodities
