Chapter 2: Alternative Investment Performance and Returns

In this section

• Performance Measurement and Benchmarking
  Performance Measurement and Benchmarking (CFA Level 1): Distinguishing Absolute and Relative Performance, Absolute Performance, and Relative Performance. Key definitions, formulas, and exam tips.
• Calculating Gross vs. Net Returns
  Calculating Gross vs. Net Returns (CFA Level 1): Distinguishing Gross vs. Net Returns, How Fees Affect the Investor Experience, and Management Fees. Key definitions, formulas, and exam tips.
• Fee Structures, Carried Interest, and Their Impact
  Fee Structures, Carried Interest, and Their Impact (CFA Level 1): Why Fee Structures Matter, Common Fee Structures in Alternative Investments, and Management Fee. Key definitions, formulas, and exam tips.
• Risk-Return Profiles and Volatility Measures
  Risk-Return Profiles and Volatility Measures (CFA Level 1): Key Risk Measures, Absolute vs Downside-Focused Approaches, and Absolute Risk Measures. Key definitions, formulas, and exam tips.
• Benchmark Selection Pitfalls
  Benchmark Selection Pitfalls (CFA Level 1): Why Benchmark Selection Matters, Common Pitfalls in Benchmark Selection, and Apples-to-Oranges Comparisons. Key definitions, formulas, and exam tips.
• Risk Decomposition and Risk-Adjusted Performance
  Risk Decomposition and Risk-Adjusted Performance (CFA Level 1): Breaking Down Risk Components in a Portfolio, Performance Attribution, and Multi-Factor Models and Identifying Alpha. Key definitions, formulas, and exam tips.
• Time-Weighted vs. Money-Weighted Returns
  Time-Weighted vs. Money-Weighted Returns (CFA Level 1): Why Different Measures Matter, Time-Weighted Rate of Return (TWR), and How TWR Works. Key definitions, formulas, and exam tips.
• Factor Attribution and Style Analysis
  Factor Attribution and Style Analysis (CFA Level 1): Why Factor Exposures Matter, Returns-Based Style Analysis, and Holdings-Based Style Analysis. Key definitions, formulas, and exam tips.
• Tracking Error and Style Drift
  Tracking Error and Style Drift (CFA Level 1): Understanding Tracking Error, Definition and Key Concepts, and Relationship to Active Share. Key definitions, formulas, and exam tips.
• Overlay Strategies and Multi-Factor Evaluations
  Overlay Strategies and Multi-Factor Evaluations (CFA Level 1): Understanding Overlay Strategies, Why Overlays?, and Types of Overlays. Key definitions, formulas, and exam tips.
• Volatility Targeting Techniques
  Volatility Targeting Techniques (CFA Level 1): Basic Principles of Volatility Targeting, Rationale Behind Volatility Targeting, and Approaches: Dynamic vs. Discrete Rebalancing. Key definitions, formulas, and exam tips.
• Upside vs. Downside Capture Ratios
  Upside vs. Downside Capture Ratios (CFA Level 1): Defining Upside vs. Downside Capture Ratios, Calculation Methodology, and Interpreting Capture Ratios. Key definitions, formulas, and exam tips.
• Manager Universe Comparison Methods
  Manager Universe Comparison Methods (CFA Level 1): Why Compare Managers to a Universe?, Constructing a Manager Universe, and Common Biases in Manager Databases. Key definitions, formulas, and exam tips.
• Persistence of Returns and Survivorship Bias
  Persistence of Returns and Survivorship Bias (CFA Level 1): Causes of Return Persistence, Strategy Dependency and Rolling Period Analysis, and Hot Hand Effect vs. Manager Skill. Key definitions, formulas, and exam tips.
• Performance Simulation and Scenario Testing
  Performance Simulation and Scenario Testing (CFA Level 1): Scenario Analysis: A Forward-Looking Perspective, Monte Carlo Simulations: Capturing Distributional Complexity, and Why Monte Carlo?. Key definitions, formulas, and exam tips.
• Advanced Peer Group Analysis
  Advanced Peer Group Analysis (CFA Level 1): Which of the following statements best captures the, When performing advanced peer group analysis in private, and Which of the following best illustrates the role. Key definitions, formulas, and exam tips.