Study Session #18
Learning Outcome Statements
(Last revised 11/26/04)

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1. “Alternative Investments”
The candidate should be able to
a) distinguish between an open-end and a closed-end fund
b) explain how the net asset value of a fund is calculated;
c) explain the nature of various fees charged by investment companies
d) distinguish among style, sector, index, global, and stable value strategies in equity investment;
e) distinguish among exchange traded funds (ETFs), traditional mutual funds and closed end
funds;
f) explain the advantages and risks of ETFs;
g) describe the forms of real estate investment;
h) explain the characteristics of real estate as an investable asset class;
i) describe the various approaches to the valuation of real estate;
j) calculate the net operating income (NOI) from a real estate investment;
k) calculate the value of a property using the sales comparison and income approaches;
l) calculate the after-tax cash flows, net present value, and yield of a real estate investment;
m) explain the various stages in venture capital investing;
n) discuss venture capital investment characteristics and the challenges to venture capital
valuation and performance measurement;
o) calculate the net present value (NPV) of a venture capital project, given the project’s possible
payoff and conditional failure probabilities;
p) discuss the descriptive accuracy of the term “hedge fund” and define hedge fund in terms of
objectives, legal structure, and fee structure;
q) describe the various classifications of hedge funds;
r) discuss the benefits and drawbacks to fund of funds investing;
s) discuss the leverage and unique risks of hedge funds;
t) discuss the performance of hedge funds and the biases present in hedge fund performance
measurement;
u) explain the effect of survivorship bias on the reported return and risk measures for a hedge
fund data base;
v) explain how the legal environment affects the valuation of closely held companies;
w) describe alternative valuation methods for closely held companies and distinguish among the
bases for the discounts and premiums for these companies;
x) discuss distressed securities investing and the similarities between venture capital investing
and distressed securities investing;
y) discuss the role of commodities as a vehicle for investing in production and consumption
z) discuss the motivation for investing in commodities, commodities derivatives and
commodity-linked securities;
aa) discuss the sources of return on a collateralized commodity futures position;

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