ALTERNATIVE INVESTMENTS -- Contents -- Acknowledgments -- PART I Introduction -- CHAPTER 1 Alternative Investments: An Overview -- INTRODUCTION -- Purpose of the Book -- Features of the Book -- Intended Audience -- STRUCTURE OF THE BOOK -- Part I. Introduction -- Part II. Real Estate -- Part III. Private Equity -- Part IV. Commodities and Managed Futures -- Part V. Hedge Funds -- SUMMARY AND CONCLUSIONS -- REFERENCES -- ABOUT THE AUTHORS -- CHAPTER 2 The Role of Alternative Investments in Strategic Asset Allocation -- INTRODUCTION -- DATA SET -- METHODOLOGY AND RESULTS -- EXTENSIONS -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- ACKNOWLEDGMENTS -- CHAPTER 3 Trends in Alternative Investments -- INTRODUCTION -- COMMON CURRENT TRENDS -- HEDGE FUNDS -- OTHER ALTERNATIVE INVESTMENT SECTORS -- Private Equity -- Managed Futures and Commodities -- Real Estate -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHOR -- CHAPTER 4 Alternative Investments and Due Diligence -- INTRODUCTION -- ALTERNATIVE INVESTMENTS -- Characteristics of Alternative Investments -- Legal and Regulatory Aspects -- ALTERNATIVE INVESTMENTS DUE DILIGENCE -- Due Diligence Methodology -- Idea Sourcing and Initial Screening -- Full Review -- Investment and Business Aspects -- FINAL EVALUATION -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHOR -- PART II Real Estate -- CHAPTER 5 REITs and the Private Real Estate Market -- INTRODUCTION -- LITERATURE -- DATA -- Descriptive Statistics -- EMPIRICAL STRATEGY -- ESTIMATION -- RESULTS -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- CHAPTER 6 Commercial Real Estate -- INTRODUCTION -- SUPPLY AND ENVIRONMENT -- REAL ESTATE CHARACTERISTICS -- PRICES AND VOLUMES -- REAL ESTATE RETURNS -- APARTMENTS.

INDUSTRIAL -- OFFICE MULTI-TENANT -- RETAIL -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHOR -- ACKNOWLEDGMENTS -- CHAPTER 7 Real Estate Investment Trusts -- INTRODUCTION -- REITS AND THE REAL ESTATE ASSET CLASS -- Error Correction and the Investment Horizon -- Effects of Illiquidity Lag and Appraisal Lag -- Effects of Illiquidity Smoothing and Appraisal Smoothing -- REITs and the Stock Market Asset Class -- HISTORICAL REIT RETURNS -- Income and Capital Appreciation -- Manager Selection -- REIT VOLATILITY AND RISK-ADJUSTED RETURNS -- Volatility Estimated from Unlevered Transaction-Based Return Indices -- THE REIT BUSINESS MODEL -- Transparency -- Liquidity -- Alignment of Interests between Investors and Investment Managers -- The Free Cash Problem -- Sources of Financing -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHOR -- CHAPTER 8 Mortgaged-Backed Securities -- INTRODUCTION -- HOW ARE MORTGAGE-BACKED SECURITIES CREATED? -- A REVIEW OF THE DIFFERENT CLASSES OF MORTGAGE-BACKED SECURITIES -- Pass-Through Mortgage Securities -- Collateralized Mortgage Obligations -- THE ROLE OF THE MBS MARKET IN THE 2007-2008 FINANCIAL CRISIS -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHOR -- CHAPTER 9 Mezzanine Debt and Preferred Equity in Real Estate -- INTRODUCTION -- MEZZANINE LOANS -- Mezzanine Loans: Investment Opportunities -- UCC Article 9 and Title Insurance -- Intercreditor Agreement between the Senior Mortgage Lender and the Mezzanine Lender -- Mezzanine Lender's Rights and Remedies upon Borrower Default -- Protection against Bankruptcy Risks -- INVESTMENT RISKS OF MEZZANINE LOANS -- Leverage, Securitization, and High-Yield Issues -- Title and Collateral Risks -- Limitations on Rights and Remedies under the Intercreditor Agreement -- PREFERRED EQUITY.

Preferred Equity Opportunities -- Right to Receive Regular Dividend Payments -- PREFERRED EQUITY RISKS -- Limitations as a Preferred Equity Member -- Limitations on the Right to Receive Cash Distributions -- Limitations under the Senior Loan -- Bankruptcy Risks -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHOR -- ACKNOWLEDGMENTS -- CHAPTER 10 Real Estate Appraisal and Valuation -- INTRODUCTION -- APPRAISALS -- INTRODUCTION TO VALUATION APPROACHES -- THE INCOME APPROACH -- Net Operating Income -- Application of the Income Approach -- The Direct Capitalization Method -- Defining the Cap Rate -- Stabilized NOI -- THE DCF Method -- Advanced DCF: Lease-by-Lease Analysis -- Advantages and Disadvantages of the Income Approach -- Common Errors in DCF Analysis -- THE COST APPROACH -- THE SALES COMPARISON APPROACH -- Advantages and Disadvantages of Cost and Sales Comparison Approaches -- RECONCILIATION -- VALUATION OF CONSTRUCTION PROJECTS -- Risk Factors for Development Projects -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- CHAPTER 11 Performance of Real Estate Portfolios -- INTRODUCTION -- PROFESSIONAL APPRAISALS OF INDIVIDUAL PROPERTIES -- Problems with Appraisal-Based Indices -- TRANSACTION-BASED PRICE INDICES -- Two Ways to Control for Quality -- Repeat-Sales Indices -- Market Segmentation in the CPPI -- STOCKMARKET-BASED INDICES -- How Stock Market-Based IndicesWork -- Stock Market-Based Indices as Information Products -- Stock Market-Based Indices as Trading Products -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHOR -- PART III Private Equity -- CHAPTER 12 Venture Capital -- INTRODUCTION -- WHY DO VENTURE CAPITAL MARKETS EXIST? -- THE DIFFERENT VENTURE CAPITAL MODELS -- WHAT DO VENTURE CAPITAL INVESTORS DO? -- Fundraising -- Deal Sourcing.

Selection and Due Diligence -- Valuation and Contracting -- Monitoring and Value Adding -- Exit -- PERFORMANCE -- Performance of Venture Capital-Backed Companies -- Value Creation for Investors in Venture Capital -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- ACKNOWLEDGMENTS -- CHAPTER 13 Mezzanine Capital -- INTRODUCTION -- DEFINITION AND FORMS OF MEZZANINE CAPITAL -- RETURN COMPONENTS -- Interest Returns -- Equity Returns -- Expected Returns -- ANALYZING ANDMITIGATING MEZZANINE CAPITAL INVESTMENT RISKS -- Warrantless Mezzanine Capital -- COMPARISON OF U.S. AND EUROPEAN MEZZANINE CAPITAL TERMS -- MEZZANINE FUNDING AS AN ALTERNATIVE TO HIGH-YIELD BONDS -- MEZZANINE FINANCING DEMAND AND SUPPLY DRIVERS -- INVESTMENT IN MEZZANINE AS AN ASSET CLASS -- Fundraising for Dedicated Mezzanine Funds -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- CHAPTER 14 Buyout Funds -- INTRODUCTION -- VALUE DRIVERS IN THE BUYOUT INVESTMENT PROCESS -- Preinvestment Phase: Fund Inception and Fundraising -- Investment Phase: Investing and Management and Monitoring -- Divestment Phase: Exit and Distribution -- PAST, PRESENT, AND FUTURE: OPPORTUNITIES AND RISK -- Economic Effects of the Financial Crisis of 2007-2008 -- Regulatory Challenges -- Reactions of the Buyout Industry -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- CHAPTER 15 Distressed Debt Investing -- INTRODUCTION -- WHAT IS DISTRESSED DEBT? -- WHAT IS DISTRESSED DEBT INVESTING? -- CERTAIN RISKS ASSOCIATED WITH DISTRESSED DEBT INVESTING -- DISTRESSED DEBT INVESTING STRATEGIES -- Passive vs. Active Investing -- DETERMINING WHICH DISTRESSED DEBT SECURITY TO BUY -- Priority of the Debt Securities -- The Fulcrum Security -- CASE STUDIES -- Allied Holdings -- Six Flags.

DISTRESSED DEBT INVESTORS AND CHAPTER 11 BANKRUPTCIES -- Debt Characteristics -- Rights of the Distressed Debt Investor under the Bankruptcy Code -- Limitations on a Creditor's Right to Vote -- DISTRESSED DEBT INVESTORS AND THE CREDITORS' COMMITTEE -- DISTRESSED DEBT INVESTORS AND MEMBERS ON AD HOC COMMITTEES -- WHAT IS AN AD HOC COMMITTEE? -- What Are the Potential Consequences of Ad Hoc Committee Membership? -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- ACKNOWLEDGMENTS -- CHAPTER 16 Performance of Private Equity -- INTRODUCTION -- ASSET VALUE-BASED MEASURES OF PERFORMANCE -- CASH FLOW-BASED MEASURES OF ABSOLUTE PERFORMANCE -- Internal Rate of Return -- MoneyMultiple -- CASH FLOW-BASED MEASURES OF RELATIVE PERFORMANCE -- CHALLENGES IN MEASURING THE PERFORMANCE OF PRIVATE EQUITY -- Incomplete Cash Flow History -- Risk-Adjusted Performance -- Funding and Illiquidity Costs -- Availability of Performance Information -- Limitations to Existing Benchmarks -- LITERATURE ON THE PERFORMANCE OF PRIVATE EQUITY FUNDS -- PERFORMANCE OF SELECTED SUBASSET CLASSES -- Venture Capital Returns -- Buyout Returns -- Returns from Real Estate Private Equity -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- CHAPTER 17 Private Equity: Risk and Return Profile -- INTRODUCTION -- GLOBAL OVERVIEW OF VENTURE CAPITAL INVESTMENT AND INDUSTRY -- LITERATURE REVIEW -- DATA AND METHODOLOGY -- Data -- Methodology -- A Numerical Example -- EMPIRICAL ANALYSIS -- Descriptive Statistics -- Estimation Results -- SUMMARY AND CONCLUSIONS -- DISCUSSION QUESTIONS -- REFERENCES -- ABOUT THE AUTHORS -- PART IV Commodities and Managed Futures -- CHAPTER 18 Investing in Commodities -- INTRODUCTION -- HOW TO INVEST IN COMMODITIES -- LITERATURE REVIEW ON THE DIVERSIFICATION EFFECT -- Including Commodities in Portfolios.

Commodities and the Business Cycle.