Alternative instrments are investment products that differ from traditional financial instruments by high levels of return and risk, as well as low liquidity. Alternative instruments include private equity, hedge funds, real estate and infrastructure.
Private equity investments entail investments in funds and managers whose primary activity is investing in private companies that are not publicly traded.
The main strategies in private equity are Buyout, Growth, Mezzanine and other strategies or combinations of them.
- Buyout funds typically target large companies in late stages of development with the goal of acquiring the controlling interest in a company and selling it in the future.
- Growth equity funds invest in companies that need additional capital for expansion, organic growth or to finance mergers and acquisitions.
- Mezzanine financing is a type of financing wherein a creditor acts as an investor and bears higher risks than that of traditional bank financing.
Hedge funds are investment funds accessible to a limited pool of investors and managed by highly qualified investment managers. The main strategies pursued by hedge funds are the following:
- Global Macro is a strategy that takes advantage of changes in interest rates, stock prices, currencies and other financial instruments, which are relatively illiquid during significant economic and political changes in various countries.
- Similar to Global Macro, the Event Driven strategy earns high returns during high levels of volatility. This strategy is successful during certain situations in the market, such as the identification of securities with increased levels of risk and arbitrage mergers and acquisition opportunities.
- The Long/Short Equity strategy involves taking long and short positions in stocks without limits on the country of issue.
- The Managed Futures strategy specializes in commodities and futures contracts and involves the use of innovative computer trading programs with well-defined rules for selecting instruments.
- The Fixed Income Arbitrage strategy is based on earning profits from arbitrage opportunities in bond markets. With this strategy an investor benefits from existing price fluctuations while limiting interest rate risk.
- Multi Strategy is an investment approach which employs different strategies simultaneously, for example a combination of long/short equity, use of trading systems to track trends and other strategies.
Real estate is property (land and buildings, or part of either, or combination of both) in possession of the owner or tenant (in accordance with a lease agreement) for the purpose of receiving rent income or appreciation in value.
Infrastructure is a complex of basic structures and facilities that support the daily functions and economic activities of a society and includes roads, electrical power supply and water supply systems, telecommunication systems, as well as public transport.
The breakdown of investments by geography includes North America, Europe, Asia/Pacific and Emerging markets.