Alternative Investments Explained

Ownership of artworks with the expectation of preservation, enjoyment, or appreciation.

Example: An investorA person or organisation that commits capital with the expectation of a financial return. buys a painting through a specialist adviser.

Art InvestmentAn asset or commitment of money made with the expectation of future income, growth, or both. means ownership of artworks with the expectation of preservation, enjoyment, or appreciation; the alternative exposure often exchanges daily liquidityThe ease and speed with which an investment can be converted into cash without a major price concession. and transparent valuation for access to a different cash-flow source or return driver.

An investor buys a painting through a specialist adviser.

Before investing in Art Investment, verify the manager or counterparty, independently confirm the asset or contract and understand who controls key decisions; the alternative exposure can appear stable because it is valued infrequently rather than because its economics are stable.

A payment to an infrastructure operator based on an asset being available at agreed performance levels.

Example: The government pays the road operator when lanes remain open and maintained.

Availability Payment is a payment to an infrastructure operator based on an asset being available at agreed performance levels; the alternative exposure sits outside conventional listed shares and bonds or uses a specialised contract, asset or strategy to produce return.

The government pays the road operator when lanes remain open and maintained.

For Availability Payment, inspect legal ownership, cash-flow source, valuation policy, leverageThe use of borrowed money or derivatives to increase exposure relative to invested capital., manager incentives, fees, lock-up, liquidity and the route to exit; the alternative exposure can appear stable because it is valued infrequently rather than because its economics are stable.

A scarce physical item bought partly for potential appreciation.

Example: Rare coins, watches, and memorabilia can be collectibles.

Collectible is a scarce physical item bought partly for potential appreciation; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

Rare coins, watches, and memorabilia can be collectibles.

Assess Collectible with a full cash-flow and downside model, including capital calls, operating costs, delayed distributions and a sale below reported value; the alternative exposure can appear stable because it is valued infrequently rather than because its economics are stable.

A manager or adviser specialising in futures, options, and related commodityA standardised physical good such as gold, crude oil, wheat, or cocoa. interests under applicable rules.

Example: The CTA runs a trend-following managed-futures programme.

Commodity Trading Adviser is a manager or adviser specialising in futures, options, and related commodity interests under applicable rules; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

The CTA runs a trend-following managed-futures programme.

Assess Commodity Trading Adviser with a full cash-flow and downside model, including capital calls, operating costs, delayed distributions and a sale below reported value; specialist access does not guaranteeA contractual promise by another party to meet an obligation if the primary debtor does not. a superior return.

A contractual right to build, operate, or collect revenue from an asset or service for a stated period.

Example: The operator collects tolls for 25 years.

Concession is a contractual right to build, operate, or collect revenue from an asset or service for a stated period; the economics of the alternative exposure may depend on manager skill, negotiated rights, operational performance, leverage or an asset without continuous market pricing.

The operator collects tolls for 25 years.

Before investing in Concession, verify the manager or counterparty, independently confirm the asset or contract and understand who controls key decisions.

Loans originated directly by an investment fund or non-bank lender to a borrower.

Example: A fund provides a senior secured loan without a public bond issue.

Direct Lending describes loans originated directly by an investment fund or non-bank lender to a borrower; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

A fund provides a senior secured loan without a public bond issue.

Assess Direct Lending with a full cash-flow and downside model, including capital calls, operating costs, delayed distributions and a sale below reported value; specialist access does not guarantee a superior return.

Debt of borrowers in financial difficulty, often trading at a deep discount.

Example: An investor buys defaulted bonds expecting a restructuringA significant change to a company's debt, operations, ownership, or organisation intended to improve viability. recovery.

Distressed Debt means debt of borrowers in financial difficulty, often trading at a deep discount; the alternative exposure sits outside conventional listed shares and bonds or uses a specialised contract, asset or strategy to produce return.

For example, an investor buys defaulted bonds expecting a restructuring recovery.

A practical review of Distressed Debt compares its net returnReturn after specified fees, costs, or taxes. and risk with a simpler public-market alternative after accounting for fees and illiquidity; specialist access does not guarantee a superior return.

Investing in troubled companies or claims with the aim of profiting from recovery, restructuring, or asset value.

Example: The investor buys debt at 30 kobo per naira of face valueThe principal amount stated on a bond and usually repaid at maturity..

Distressed Investing describes investing in troubled companies or claims with the aim of profiting from recovery, restructuring, or asset value; the alternative exposure often exchanges daily liquidity and transparent valuation for access to a different cash-flow source or return driver.

The investor buys debt at 30 kobo per naira of face value.

Before investing in Distressed Investing, verify the manager or counterparty, independently confirm the asset or contract and understand who controls key decisions.

A strategy seeking returns from mergers, spin-offs, restructurings, bankruptcies, or other events.

Example: The portfolioThe complete collection of investments owned by an investor or managed under one mandate. buys merger targets and distressed debt.

Event-Driven Strategy is a strategy seeking returns from mergers, spin-offs, restructurings, bankruptcies, or other events; the alternative exposure often exchanges daily liquidity and transparent valuation for access to a different cash-flow source or return driver.

The portfolio buys merger targets and distressed debt.

Before investing in Event-Driven Strategy, verify the manager or counterparty, independently confirm the asset or contract and understand who controls key decisions; specialist access does not guarantee a superior return.

Ownership or financing of agricultural land for rental incomePayments received from tenants for the use of property., production, and appreciation.

Example: A fund leases farmland to commercial growers.

Farmland Investment means ownership or financing of agricultural land for rental income, production, and appreciation; the alternative exposure sits outside conventional listed shares and bonds or uses a specialised contract, asset or strategy to produce return.

A fund leases farmland to commercial growers.

Before investing in Farmland Investment, verify the manager or counterparty, independently confirm the asset or contract and understand who controls key decisions; specialist access does not guarantee a superior return.

A strategy buying favoured shares and shorting shares judged unattractive based on company research.

Example: The manager buys efficient banks and shorts weakly capitalised peers.

Fundamental Long-Short Equity is a strategy buying favoured shares and shorting shares judged unattractive based on company research; the alternative exposure sits outside conventional listed shares and bonds or uses a specialised contract, asset or strategy to produce return.

The manager buys efficient banks and shorts weakly capitalised peers.

Assess Fundamental Long-Short Equity with a full cash-flow and downside model, including capital calls, operating costs, delayed distributions and a sale below reported value; specialist access does not guarantee a superior return.

A strategy taking positions based on broad economic, political, currency, rate, and commodity views.

Example: The fund goes long one currency and short another after a policy shift.

Global Macro Strategy is a strategy taking positions based on broad economic, political, currency, rate, and commodity views; the alternative exposure sits outside conventional listed shares and bonds or uses a specialised contract, asset or strategy to produce return.

The fund goes long one currency and short another after a policy shift.

A practical review of Global Macro Strategy compares its net return and risk with a simpler public-market alternative after accounting for fees and illiquidity; specialist access does not guarantee a superior return.

Investment in long-lived systems and facilities that provide essential services.

Example: A fund owns power, transport, and fibre-network assets.

Infrastructure Investment means investment in long-lived systems and facilities that provide essential services; the alternative exposure sits outside conventional listed shares and bonds or uses a specialised contract, asset or strategy to produce return.

For example, a fund owns power, transport, and fibre-network assets.

For Infrastructure Investment, inspect legal ownership, cash-flow source, valuation policy, leverage, manager incentives, fees, lock-up, liquidity and the route to exit. Also compare Project Finance, defined here as financing repaid primarily from the cash flows of a specific project, often with limited recourse to sponsors.

A systematic or discretionary strategy trading futures across asset classes.

Example: The programme follows trends in commodities, currencies, bonds, and equity indices.

Managed Futures is a systematic or discretionary strategy trading futures across asset classes; the alternative exposure often exchanges daily liquidity and transparent valuation for access to a different cash-flow source or return driver.

The programme follows trends in commodities, currencies, bonds, and equity indices.

Assess Managed Futures with a full cash-flow and downside model, including capital calls, operating costs, delayed distributions and a sale below reported value; the alternative exposure can appear stable because it is valued infrequently rather than because its economics are stable.

Subordinated financing that sits between senior debtDebt that ranks ahead of subordinated claims in repayment priority. and equity and may include equity-linked features.

Example: A buyout uses mezzanine debt to complete its financing.

Mezzanine Debt describes subordinated financing that sits between senior debt and equity and may include equity-linked features; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

A buyout uses mezzanine debt to complete its financing.

Before investing in Mezzanine Debt, verify the manager or counterparty, independently confirm the asset or contract and understand who controls key decisions; specialist access does not guarantee a superior return.

A fund combining several investment strategies under one portfolio.

Example: Capital shifts among credit, macro, equity, and event-driven teams.

Multi-Strategy Fund is a fund combining several investment strategies under one portfolio; the alternative exposure often exchanges daily liquidity and transparent valuation for access to a different cash-flow source or return driver.

Capital shifts among credit, macro, equity, and event-driven teams.

Before investing in Multi-Strategy Fund, verify the manager or counterparty, independently confirm the asset or contract and understand who controls key decisions; illiquidity can last longer than the stated investment horizon.

Non-bank lending to privately held companies or assets.

Example: A private-credit fund makes a five-year loan to a mid-sized business.

Private Credit describes non-bank lending to privately held companies or assets; the economics of the alternative exposure may depend on manager skill, negotiated rights, operational performance, leverage or an asset without continuous market pricing.

A private-credit fund makes a five-year loan to a mid-sized business.

For Private Credit, inspect legal ownership, cash-flow source, valuation policy, leverage, manager incentives, fees, lock-up, liquidity and the route to exit; complexity and high fees can consume the diversification benefitThe reduction in overall portfolio risk achieved by combining assets that do not move identically. of the alternative exposure.

Financing repaid primarily from the cash flows of a specific project, often with limited recourse to sponsors.

Example: A toll-road loan is serviced from toll revenue.

Project Finance describes financing repaid primarily from the cash flows of a specific project, often with limited recourse to sponsors; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

A toll-road loan is serviced from toll revenue.

For Project Finance, inspect legal ownership, cash-flow source, valuation policy, leverage, manager incentives, fees, lock-up, liquidity and the route to exit; illiquidity can last longer than the stated investment horizon.

A long-term arrangement between government and private parties to deliver infrastructure or public services.

Example: A private consortium builds and operates a hospital under a concession.

Public-Private Partnership is a long-term arrangement between government and private parties to deliver infrastructure or public services; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

A private consortium builds and operates a hospital under a concession.

For Public-Private Partnership, inspect legal ownership, cash-flow source, valuation policy, leverage, manager incentives, fees, lock-up, liquidity and the route to exit; the alternative exposure can appear stable because it is valued infrequently rather than because its economics are stable.

A strategy seeking to profit from price differences between related securities while limiting broad market exposure.

Example: The fund trades the spread between two similar bonds.

Relative-Value Strategy is a strategy seeking to profit from price differences between related securities while limiting broad market exposure; the economics of the alternative exposure may depend on manager skill, negotiated rights, operational performance, leverage or an asset without continuous market pricing.

The fund trades the spread between two similar bonds.

For Relative-Value Strategy, inspect legal ownership, cash-flow source, valuation policy, leverage, manager incentives, fees, lock-up, liquidity and the route to exit; the alternative exposure can appear stable because it is valued infrequently rather than because its economics are stable.

A company that finances producers in exchange for a percentage of revenue or output.

Example: A gold royalty company receives payments without operating the mine.

Royalty Company is a company that finances producers in exchange for a percentage of revenue or output; the alternative exposure sits outside conventional listed shares and bonds or uses a specialised contract, asset or strategy to produce return.

A gold royalty company receives payments without operating the mine.

Assess Royalty Company with a full cash-flow and downside model, including capital calls, operating costs, delayed distributions and a sale below reported value; illiquidity can last longer than the stated investment horizon.

Investments driven by unusual corporate, legal, or financial events.

Example: A fund invests in a company undergoing a complex restructuring.

Special Situations describes investments driven by unusual corporate, legal, or financial events; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

For example, a fund invests in a company undergoing a complex restructuring.

A practical review of Special Situations compares its net return and risk with a simpler public-market alternative after accounting for fees and illiquidity. Also compare Event-Driven Strategy, defined here as a strategy seeking returns from mergers, spin-offs, restructurings, bankruptcies, or other events.

A financing arrangement granting the investor the right to buy part of future production at a predetermined price.

Example: A streaming company funds mine development for discounted metal deliveries.

Streaming Agreement is a financing arrangement granting the investor the right to buy part of future production at a predetermined price; the economics of the alternative exposure may depend on manager skill, negotiated rights, operational performance, leverage or an asset without continuous market pricing.

A streaming company funds mine development for discounted metal deliveries.

A practical review of Streaming Agreement compares its net return and risk with a simpler public-market alternative after accounting for fees and illiquidity; complexity and high fees can consume the diversification benefit of the alternative exposure.

Ownership of forest assets for biological growth, timber sales, and land value.

Example: Trees grow while the manager waits for favourable timber prices.

Timberland Investment means ownership of forest assets for biological growth, timber sales, and land value; the investment vehicle matters as much as the underlying idea because fees, lock-ups, financing and legal rights shape the realised payoff.

Trees grow while the manager waits for favourable timber prices.

For Timberland Investment, inspect legal ownership, cash-flow source, valuation policy, leverage, manager incentives, fees, lock-up, liquidity and the route to exit; complexity and high fees can consume the diversification benefit of the alternative exposure.

Ownership of investment-grade wine intended for later resale.

Example: Cases are stored professionally until market demand improves.

Wine Investment means ownership of investment-grade wine intended for later resale; the economics of the alternative exposure may depend on manager skill, negotiated rights, operational performance, leverage or an asset without continuous market pricing.

Cases are stored professionally until market demand improves.

Assess Wine Investment with a full cash-flow and downside model, including capital calls, operating costs, delayed distributions and a sale below reported value; the alternative exposure can appear stable because it is valued infrequently rather than because its economics are stable.