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101 Concepts for the Level I Exam

Concept 95: Alternative Investments v/s Traditional Investments


Traditional investments include long-only position in stocks, bonds and cash. All other investments are classified as alternative investments.

Alternative investments include investments in:

  • real estate
  • commodities
  • private equity
  • hedge funds

Compared to traditional investments, alternative investments typically have:

  • lower liquidity.
  • less regulation.
  • lower transparency.
  • higher fees.
  • limited and potentially biased historical risk and return data.
  • unique legal and tax considerations.