Evaluating Alternative Investments

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Course Features

  • Course Code: 403
  • Certificate: Yes
  • CPE Credits: 14
  • Level: Intermediate
  • Prerequisites: None
  • Method: Live & Virtual
  • Venue: MicroTek
  • Time: 9:00 am – 5:00 pm
  • Registration: 8:30 am
  • Dress Code: Business Casual

Alternative Investments

This two-day course presents opportunities and challenges of Alternative Investments. The course includes some of the portfolio considerations of including alternatives, compared to traditional investments. It also has performance evaluation methods to ascertain Alpha that investors seek. Alternative investments generally include real estate, hedge funds, venture capital, private equity, commodities, as well as some other specialized areas, such as project financing and entertainment finance. This course covers some of the basics and includes valuation models that can be quite complex in making alternative investments. Valuation pitfalls will be pointed out, The course revolves around examples and discussions in class in order to enrich the knowledge of this topic. It is expected that students already have familiarity of introductory finance topics. Students are expected to participate in class examples and discussions.

 

Target Audience

Financial analysts, individual investors, asset allocators, auditors, high net-worth managers, specialists and financial planners.

 

Pre-requisites

Basic knowledge of the capital markets. Use of Excel and a financial calculator would be useful but not required for in-class examples

 

DAY ONE

 

Overview of Alternative Investments

  • Traditional Investments – Types compared to Alternative Investments
  • Manager tricks in enhancing returns and investor traps in evaluating alternative investments will be done in each section
  • Mark to market accounting
  • Size and Growth of industry characteristics of Alternatives Investments
  • Alternative Investments – Types. The most common and comments on more specialized ones
  • Alternative Investments – Role in Modern Portfolio Theory
  • Special Risk Measures beyond first and second movements such as return, standard deviation.
  • Skewness, kurtosis, correlation, covariance issues
  • Performance tricks
  • Statistical issues such as VARs and probability modeling as pertinent to Alternative Investments
  • Creating Optimal portfolios
  • Timing when to do traditional as compared to alternative strategies

 

Commodity Investing

  • Definition of a Commodity Trading Advisor
  • Fundamental and Technical Analysis Techniques
  • Blending technical analysis uses including Fibonacci ratios, patterns, support/resistance tools, sentiment
  • Examples
  • Contango and Backwardation Issues
  • Tradeoffs on Investing in Physical commodities, producers or derivatives
  • Margin requirements
  • Special risks
  • Evaluation of Risk/Reward Results

 

Private Equity

  • Private Equity – Definition
  • Private Equity – Legal Structures
  • Venture Capital vs LBOs
  • Challenges of Venture Capital in various investment stages
  • Investment Methods
  • Cash Flows versus accounting GAAP, IFRS versus Economic Accounting
  • Traps in Cash Flows
  • IRR issues
  • Mileposts versus cash flows
  • Exit strategies
  • LBO/MBO Issues
  • Example/Cases
  • Project Financing
  • Behavioral Issues and Herd Investing
  • Evaluation of Risk/Reward Results

 

Private Equity vs. Hedge Funds

  • Investment Approaches similarities and differences
  • Hedge Fund Investments in Private Equity
  • Fees and liquidity compared to other Alternative and traditional investments

 

DAY TWO

 

Real Estate

  • Real Estate Structures
  • Role in Portfolio Diversification
  • Valuation Methods of NOI, ATCF, comprables
  • Example and pro-forma issues
  • Rent versus Own
  • Direct investment compared to REITS and quasi-real estate companies
  • Hidden real estate issues
  • Financially engineering in Real Estate
  • Evaluation of Risk/Reward Results

 

Hedge Funds  

  • Definition of a Hedge Fund
  • Industry comments on size
  • Some key legal structures and regulations
  • Common Hedge Fund Traits
  • Hedge Fund Styles and Strategies
  • Some illustrated examples, including merger arb and carry trades
  • More exotic strategies with black boxes and algorithmic trading
  • Evaluating hedge funds on specialized risk measures,
  • including Sortino, Omega, Drawdowns, Left Tail Stress Tests
  • Database biases
  • Leverage issues Evaluation of Risk/Reward Results

 

Alternatives and Other Issues

  • Blended alternative investments risk/rewards results compared to traditional only investments
  • Comments on other specialized alternative investments such as collectibles, entertainment financing, and hypertrading
  • Comments on replicating alternatives, especially hedge funds with the growing use of financial engineering methods
  • Ethical issues and expected future regulation directions
  • International Issues and investing opportunities

Instructor

  • V. John Palicka CFA CMT  has over 30 years of experience in researching and managing money in global, emerging, and US small-cap stocks.  He is currently in his 27th year as President and Chief Portfolio Manager at Global Emerging Growth Capital (GEGC). GEGC provides three major financial services: asset management, corporate finance, and knowledge consulting …
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