Fundamentals of Alternative Investments: Learning Modules

The following information pertains to the flagship program that has now been enhanced. For professionals who earned the FAI certificate before January 8, 2024, they were exposed to the preceding modules during their certification process.

Lesson 1:

Traditional vs. Alternative Investments

  • Traditional Investments
  • Structures in Alternative Investments
  • Traditional vs. Alternative Investments
  • Types of Alternative Investments
  • Drivers of Asset Allocation
  • Registered Products vs. Private Placements
Lesson 2:

Investment Returns and Risk (Benchmarking)

  • Investment Returns
  • The Normal Distribution Return Attribution
  • Benchmarking with Peer Groups
  • Benchmarking with Betas
  • Risk and Standard Deviation
  • Autocorrelation
  • Other Measures of Risk
  • Risk-Adjusted Performance
Lesson 3:

Correlation and Efficient Frontiers

  • Covariance
  • Diversification
  • Autocorrelation
  • Beta as a Measure of Systematic Risk
  • Challenges of Statistical Analysis
Lesson 4:

Portfolio Management and Asset Allocation

  • Asset Allocation
  • Questionnaires and Model Portfolios
  • The CAPM and Passive Indexing
  • The Endowment Model
  • Mean-Variance and Higher Moment Models
  • Risk Budgeting Models
  • Multi-Factor Models
  • Liability-Driven Models
  • Risk-Parity Models
  • Scenario-Based Models
  • Core vs. Non-Core Models
Lesson 5:

Due Diligence

  • Introduction to Due Diligence
  • The Investment Objective of the Fund
  • The Fund Investment Process
  • Value Added by Fund Managers
  • The Structural Review
  • The Strategic Review
  • Strategy-Specific Due Diligence: Convertible Arbitrage
  • Best Practices: President’s Working Group on Financial Markets
Lesson 6:

Risk Management

  • Risk Management
  • Stated Investment Strategy Risks
  • Managing Market Risk
  • The Three Fund Functions
  • Investment Process Risk
  • Operational Risk
  • Internal Control Procedures
  • Potential Interaction of Operational Errors and Market Risks
Lesson 7:

Hedge Funds 1: Structure, Categories, and Biases

  • Overview of Hedge Funds
  • Hedge Fund Industry: Growth
  • Hedge Fund Industry: Overall Performance
  • Hedge Fund Industry: Investment Strategies
  • Dynamics of Hedge Funds
  • Issues with Hedge Fund Data
Lesson 8:

Hedge Funds 2: Relative Value and Event Driven Strategies

  • Introduction to Event-Driven Hedge Funds
  • Sources of Event-Driven Strategy Returns
  • Activist Investing
  • Merger Arbitrage
  • Distressed Debt Funds
  • Capital Structure Arbitrage
  • Other Types of Event-Driven Funds
  • Relative Value Hedge Funds
  • Convertible Bond Arbitrage
  • Fixed Income Arbitrage
  • ABS and MBS Strategies
  • Relative Value Multi-Strategy Funds
Lesson 9:

Hedge Funds 3: Macro and Managed Futures Strategies

  • Introduction to Macro and Managed Futures Funds
  • Discretionary vs. Systematic Trading
  • Technical Analysis
  • Fundamental Analysis
  • Macro Funds
  • Managed Funds
  • Systematic Trading Rules
  • Asset Returns
  • Conditional Correlation
  • Maximum Drawdown
  • Portfolio Effects
Lesson 10:

Hedge Funds 4: Funds of Funds

  • Introduction to Funds of Funds
  • Internal Management & Multi-Strategy Funds
  • Four Functions of Funds of Funds
  • Benefits of Funds of Funds
  • Disadvantages of Funds of Funds
  • Value Added by Fund of Funds Managers
  • Manager Allocation and Selection Process
  • Portfolio Construction Considerations
  • Evaluating Fund of Funds Performance
Lesson 11:

Hedge Funds 5: Equity Strategies

  • Introduction to Equity Hedge Funds
  • Equity Hedge Fund Strategies
  • Differentiating Equity Hedge Funds
  • Equity Long/Short Funds
  • Equity Market-Neutral Funds
  • Short-Bias Funds
  • Short Selling Risks and Returns
  • Performance Attribution
  • Fundamental vs. Quantitative Managers
  • Quantitative Strategies
  • Fundamental Strategies
  • Momentum-Based Equity Approaches
  • Anomalies and Anomaly Strategies
Lesson 12:

Real Assets 1: Timberland, Farmland, and Intellectual Property

  • Introduction to Real Assets
  • Types of Lots
  • Timberland Investment Characteristics
  • Farmland Investment Characteristics
  • Infrastructure Investment
  • Intellectual Property Characteristics
  • Art Characteristics
  • A Simplified Model of IP Valuation
Lesson 13:

Real Assets 2: Real Estate Equity and Markets

  • Real Estate Characteristics
  • Real Estate Valuation
  • Real Estate Investment Opportunities
  • Real Estate Indices
  • Real Estate Securitization
Lesson 14:

Private Equity 1: Introduction and Performance Analysis

  • What is Private Equity?
  • Why Private Equity?
  • Private Equity Fund Structure
  • Cash Flows, Fees & Waterfall
  • Common Performance Measures
  • IRR Calculation
  • TVPI, DPI, and RVPI Calculations
  • Performance Measures
  • Risks Associated with Private Equity
Lesson 15:

Private Equity 2: LBO, VC, and Debt Strategies

  • Venture Capital Funds
  • Performance Measures
  • Buyout Funds
  • Mezzanine Debt
  • Distressed Debt
  • Private Equity Investment Process
  • Liquidity Management
  • Manager Selection
Lesson 16:

Commodities 1: Markets and Inflation Protection

  • Introduction to Commodities
  • Long-Term Commodity Returns
  • Commodities vs. Financial Assets
  • The Role of Emerging Markets
  • Ways to Gain Exposure to Commodities
  • Contango and Backwardation
Lesson 17:

Commodities 2: Beta Products, Alpha Products, and Benchmarks

  • Alpha and Beta Strategies
  • Alpha: Directional Strategies
  • Alpha: Relative Value Strategies
  • Relative Value: Calendar Spreads
  • Relative Value: Correlation Spreads
  • Intra-Market Relative Value Strategies
  • Fundamental Analysis
  • Commodity Beta
  • Commodity Futures Indices
  • Enhanced Commodity Futures Indices
  • Major Commodity Indices
Lesson 18:

Structured Products 1: Credit Default Swaps (CDS)

  • Introduction to Credit Default Swaps
  • Major CDS Concepts
  • Trigger Events
  • Valuing a CDS
  • Users and Uses of CDS
  • The Economic Role of CDS
  • CDS vs. Total Return Swaps
  • Lifecycle of a CDS
  • Additional Details about CDS
  • CDS Indexes
Lesson 19:

Structured Products 2: Collateralized Debt Obligations (CDO)

  • What is a CDO?
  • CDO Balance Sheet
  • CDO Cash Flow Waterfall
  • Posting of Default Losses
  • Credit Ratings of CDOs
  • Economic Roles of CDOs
  • Terminology and Practices of CDOs
  • CDO Risk Management
Lesson 20:

Capstone: The Risks and Rewards of Alternative Investments

  • Fundamentals Retrospective
  • Diversification across Idiosyncratic Risks
  • Diversification across Risk Factors
  • Diversification across Scenarios
  • Return Enhancement through Liquidity Premiums
  • Return Enhancement through Complexity Risk Premiums
  • Return Enhancement through Alternative Beta Opportunities
  • Return Enhancement through Investor Asymmetries
  • Return Enhancement through Persistent Alpha
  • The Challenges of Alternative Investment Management
  • The Risks and Rewards of Alternative Investments

Bonus Topics:

Liquid Alternatives

  • Limited Partnerships
  • 40 Act and UCITS Funds
  • Types of Funds and Structures
  • Performance
  • Portfolios, Due Diligence, and Challenges of Liquid Alts

Opportunities in Private Credit

  • Fixed-Rate vs. Floating-Rate Debt
  • Investment Grade vs. High Yield Debt
  • Capital Structure and Covenants
  • Credit Ratings and Credit Spreads
  • Bankruptcy, Defaults and Recovery Rates
  • Distressed Debt
  • Mezzanine Debt
  • Direct Lending
  • Interval Funds and BDCs
  • Private Debt in Hedge Funds and Private Equity Funds

ESG Investing 1: History, Approaches, and Integration

  • The History of ESG
  • Approaches to ESG
  • The Three Pillars of ESG