all of the following are common features of alternative investments except: a. illiquidity b. readily available risk and return data c. it is difficult to determine current market value d. as an asset class, they raise unique legal and tax considerations# answer: B Historical risk and return data is generally limited and not very easy to obtain. ------------------------------------------------------------------------------ I agree on b. I think a. illiquidity is also right, ETF and close-end fund can be traded at exchange easily, very liquid not like other alternative investments real estate and venture capital, which are very illiquid. So it is not a common features of alternative investments. C looks also should be choosed venture capital’s current market value is hard to tell, while ETF and close-end fund’s market value refreshed almost very minute. D, probably is a common feature of alternative investment.
Since when are ETFs and closed-end funds considered alternative investments?
Agreed. ETF and closed end funds are not alternative investments.
In the Schweser books, they classify ETF’s and all mutual funds under alternative investments… I agree that they aren’t really alt investments, but the confusion is warranted.
Actually, Schweser follows CFAi LOS. And in CFAi curriculum SS18 belows as Alternative invesment: .open-end fund/close-end fund .ETF .real estate including REIT and Mortgage holder .venture capital investment .hedge fund .distressed securities investment .commodity/commodity derivatives/commodity-linked securities I found schweser notes skipped some content related to this Q. In CFAi curriculum volume5, P176~177, summary of common features of alternative investments: .illiquidity .difficulty in determining current market values .limited historical risk and return data .extensive investment analysis required 2 additional features of alternative investments: .a liquidity premium compensates the investor for investor’s inability to continously rebalance the alternative investments in portfolio .a segmentation premium compensates investor for risk of alternative assets that, by nature, are generally not priced in a fully intergrated global market a final character of alternative investments is raising unique legal and tax considerations. ---------------------------------------------------------------------- the question is almost word-for-word from above part. my only reasonable explanation is “common features” doesn’t mean every one should have the feature, it means almost every one in the group has the feature instead.
It’s an unfortunate classification by CFAI, and i’m surprised to see that the quotation used for the list of alternative investments dates back to '99. ETFs were considered alts back in '99, but they r definitely not any more. I guess CFAI didn’t have where else to classify mutual funds and ETFs.