Kathryn Kaminski, PhD, CAIA

The investment community has heard and is following the
siren call of Alternative Investments. Their seductive return
properties and the mystique surrounding how they make money
has tantalized investors resulting in exponential growth of
assets under management. The key issue remains that dynamic
strategies in Alternative Investments perform differently and
are exposed to a different set of underlying risks than traditional
investment vehicles. By taking a closer look into… Show more

The investment community has heard and is following the
siren call of Alternative Investments. Their seductive return
properties and the mystique surrounding how they make money
has tantalized investors resulting in exponential growth of
assets under management. The key issue remains that dynamic
strategies in Alternative Investments perform differently and
are exposed to a different set of underlying risks than traditional
investment vehicles. By taking a closer look into times when
markets are stressed or in crisis (often called “tail risk” events),
this investment primer will explain how some Alternative
Investment strategies provide crisis alpha opportunities while
others suffer substantial losses during times of market stress.
Crisis alpha opportunities are profits which are gained by
exploiting the persistent trends that occur across markets during
crisis. By gaining a better understanding of what happens during
crisis, the underlying risks in Alternative Investment strategies
can be divided into three key groups: price risk, credit risk, and
liquidity risk. By understanding and classifying Alternative
Investments according to their underlying risks, performance
metrics commonly used in this industry can be explained in
simpler terms helping investors to use them more effectively as
part of a larger investment portfolio strategy or philosophy. Show less