Introductory description

Alternative investments by their very nature are applications of various disciplines. Therefore, this general practitioner (foundation) module will build on the students’ knowledge from any relevant modules such as: general finance, corporate finance, investment, economics, accounting, financial analysis, asset pricing, valuation, business/management, statistics, econometrics, financial mathematics, big data, machine learning, engineering, law, etc., (none of such subjects is a specific prerequisite for this elective).

Students are strongly encouraged to make the practical link between their other subjects and the topics of this elective and how this could inform their future career or research decisions. It would enable students to recognise how they can leverage their knowledge in other disciplines to pursue and develop a career in or around investment. Below are some examples (but not exhaustive).

Economics ↔ Global Macro Hedge Fund Strategies, Strategic Asset Allocation
Corporate Finance, Corporate Governance ↔ Merger Arbitrage, Corporate Activism, Private Equity, Long-Only Active Equities
Accounting, Valuation, Equities ↔ Fundamental Equity Long/Short Hedge Funds, Private Equity, Long-Only Active Equities
Fixed Income ↔ Fixed Income Arbitrage, Distressed Securities Investing, L/O Active FI
Mathematics, Econometrics, Statistics, Big Data, Machine Learning, Coding, Engineering ↔ Quantitative Investing, Systematic Trading/Investing, Managed Futures
The same way of thinking applies to other fields of finance and investment

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

Introduction to Hedge Funds:

• Global Macro
• Managed Futures
• Event-Driven Hedge Funds
• Relative Value Hedge Funds
• Equity Hedge Funds
• Funds of Hedge Funds
• Risk Premia: Alternative Risk Premia vs Smart Beta
• Due Diligence of Fund Managers

Private Equity including Venture Capital

Introduction to Real Assets

Learning outcomes

By the end of the module, students should be able to:

• Demonstrate a clear understanding of hedge fund strategies, their behaviour under different macro environments and their statistical properties
• Demonstrate a clear understanding of the basics of Private Equity as an alternative asset class
• Demonstrate a clear understanding of the basics of risk premia strategies
• Demonstrate a clear understanding of the pros and cons of investing in alternatives, and the role they can play in a diversified investment portfolio.
• Critically analyse academic papers and understand the covered research on hedge funds and private equity
• Identify the strengths and weaknesses of investing in specific alternative strategies
• Critically analyse the statistical impact of adding hedge funds to the a traditional portfolio consisting of long only assets

Indicative reading list

Main Textbook
Chambers, et al., Alternative Investments CAIA Level I, Wiley (2020 4th edition or if you have the 2015 3rd edition).

Optional – Additional alternative investments references
Chartered Alternative Investment Analyst (CAIA) Association book: Kazemi, Black and Chambers (2020), Alternative Investments: An Allocator's Approach, 4th edition, Wiley
Chartered Alternative Investment Analyst (CAIA) Association book: Kazemi, Black and Chambers (2016), Alternative Investments CAIA Level II, 3rd edition, Wiley
Ludovic Phalippou, Private Equity Laid Bare, 2017 (and free resources on http://pelaidbare.com/)
Bookstaber, Richard (2007), A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation, Wiley
Thaler Richard H. (2020), The Winner's Curse: Paradoxes and Anomalies of Economic Life, Free Press
Zuckerman, Gregory (2019), The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution, Portfolio Penguin
Euan Sinclair, Volatility Trading, 2013, 2nd edition, Wiley
Dunbar, Nicholas (2000), Inventing Money: The Story of Long-Term Capital Management and the Legends Behind It: Long-term Capital Management and the Search for Risk-free Profits, Wiley
Lowenstein, Roger (2002), When Genius Failed: The Rise and Fall of Long Term Capital Management, Fourth Estate
Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable, 2010

Optional – Additional general investment and finance references students could refer to (general or to support a specific topic)
McKinsey & Company Inc., Koller, Goedhart and Wessels (2020), Valuation: Measuring and Managing the Value of Companies, 7th edition, Wiley
Brealey, Myers and Allen (2020), Principles of Corporate Finance, 13th edition, McGraw-Hill
Bodie, Z., Kane, A., and Marcus, A.J. (2018), Investments, 11th International edition, McGraw-Hill
Elton, E., Gruber, M.J., Brown S.J. and Goetzmann W.N. (2010), Modern Portfolio Theory and Investment Analysis, 9th edition, Wiley
Hull, J.C. (2017), Options, Futures, and Other Derivatives, 9th Global Edition, Pearson

Industry reports and documents (where available online or will posted on my.wbs) – below are some examples:
The Boston Consulting Group (BCG), Global Asset Management 2019-2021 Reports
The Investment Association (IA) Annual Survey, Asset Management in the UK 2017-2021 reports
Morgan Stanley, AIP Hedge Fund Team, Hedge Fund Strategy Outlook, 2018, 2019
McKinsey Global Private Markets Reviews 2018-2021
Alternative Investment Management Association (AIMA) and Bloomberg, The Hedge Fund Start-Up Guide

Research element

Group project that requires researching a hedge fund strategy and presenting to class where the class acts as the investment committee of an institutional investor

Interdisciplinary

Extensive as detailed under Module Description above

International

This module covers alternative investments and their strategies globally

Subject specific skills

Style analysis hedge funds

Transferable skills

Written communication
Oral communication