Alternative Investments: CFA® Level I

It is 6–9% of the 2027 Level I exam. 26 learning outcomes across 7 learning modules.

280+ practice questions and 4 formula cards on this topic in the app.

Alternative Investment Features, Methods, and Structures

• Set out the main types of alternative investment
• Explain what sets alternative investments apart from traditional ones
• Outline the ways an investor can gain access to alternative investments
• Explain how a limited partnership is organised and governed

Alternative Investment Performance and Returns

• Differentiate the internal rate of return and time-weighted return when applied to alternatives
• Explain how valuation lag affects the returns reported for alternatives
• Set out risk measures suited to return distributions that are not normal

Investments in Private Capital: Equity and Debt

• Set out the stages at which private equity invests and the ways it exits
• Outline the main types of private debt
• Explain the ways private equity managers add value
• Explain the J-curve and how a fund's cash flows typically evolve over time

Real Estate and Infrastructure

• Set out the different ways to invest in real estate
• Outline the main methods for valuing real estate
• Contrast REITs with owning property directly
• Explain the defining features of infrastructure investments

Natural Resources

• Explain what drives the returns earned on a commodity futures position
• Set out the investment features of timberland and farmland
• Explain roll return and its link to how the futures curve is shaped
• Analyse how natural resource investments behave in terms of risk, return and diversification

Hedge Funds

• Set out the strategies hedge funds use and how they charge fees
• Work out hedge fund fees and explain what they mean
• Explain how funds of funds are structured and how their fees stack up
• Explain why hedge fund index returns as reported can be biased

Introduction to Digital Assets

• Explain what digital assets are and their features as investments
• Explain distributed ledger technology and where it is used
• Set out the vehicles for investing in digital assets and the risks they carry