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The Investment Assets Handbook: A definitive practical guide to asset classes

Book Description

Investors who build diversified, multi-asset portfolios, have an ever increasing range of investment assets at their disposal. In order to invest effectively - and build a solid, performing portfolio - it is essential for investors to understand each of these single asset classes and how to use them in portfolios. The Investment Assets Handbook covers the full spectrum of different asset classes and investment types available today, providing investors with the definitive information they need to reach an understanding of the broad range of investment assets. The Handbook is divided into four parts: 1. An introduction to asset classes, including how they should be defined, the main features that can be used to characterise asset classes and the roles that different assets fulfil within a multi-asset portfolio. 2. Traditional assets, including global equities, fixed income and cash. 3. Alternative assets, including real estate, commodities, private equity and hedge funds. 4. New alternative investments, including currency, infrastructure, structured finance, leveraged loans, structured products, alternative or smart betas, volatility, art, insurance-linked securities and timber. Each asset chapter within these sections provides a description of the asset and its characteristics, its historic performance, how to model its future long-term performance, the role it performs in a multi-asset portfolio, its risks, how to access it, and other relevant topics. Long-term investment themes that may impact the future behaviour of assets and investing generally are also highlighted and discussed. The Investment Assets Handbook is the essential guide that investors need as they navigate the universe of investment assets and build multi-asset portfolios.

Table of Contents

  1. Cover
  2. Publishing details
  3. About the Author
  4. Disclaimer
  5. Acknowledgements
  6. Preface
    1. The focus of this book
    2. Book structure
  7. Part I. Introduction
    1. What is an asset class?
    2. Income and price appreciation
    3. Risk and conservative assets
    4. Alpha and beta
    5. Sub-asset classes
    6. Criteria for asset classes
    7. Classification of assets
    8. Investing in portfolio context
    9. Summary
  8. Part II. Traditional Asset Classes
    1. Introduction
      1. Unbundling traditional asset classes
      2. Traditional asset classes
      3. Summary
    2. Chapter 1: Global Equities
      1. What are equities?
      2. Drivers of equity returns
      3. Equity valuation
      4. Equity categorisation
      5. Access
      6. Past and future equity returns
      7. The reasons for investing in equities
      8. Risks
      9. Investment principles of Benjamin Graham
      10. Global equity return and risk characteristics
      11. Small caps
      12. Equity investment styles
      13. Emerging market equity
      14. Frontier markets
      15. Conclusions
      16. Summary
    3. Chapter 2: Fixed Income
      1. Introduction – bond basics
      2. Government bonds
      3. Inflation-linked bonds
      4. Corporate bonds
      5. High-yield bonds
      6. Global developed bonds
      7. Emerging market debt
      8. Convertible bonds
    4. Chapter 3: Preferred stocks
      1. Preferred stocks and bonds
      2. Preferred stocks and common stocks
      3. Preferred stock characteristics
      4. The reasons for investing in preferreds and their risks
      5. Industry concentration risk
      6. Credit risk
      7. Preferred stock return and risk characteristics
      8. Conclusions
      9. Summary
    5. Chapter 4: Cash
      1. Money market
      2. The reasons for investing in cash
      3. Risks
      4. Cash return and risk characteristics
      5. Conclusions
      6. Summary
  9. Part III. Alternative Investments
    1. Introduction
      1. Characteristics of alternatives
      2. Directional and non-directional investments
      3. Risk diversifiers and return enhancers
      4. Alternative betas
      5. Expected returns of alternative investments
      6. Summary
    2. Chapter 5: Real estate (property)
      1. Access
      2. Drivers of property returns
      3. Estimating real estate expected returns
      4. Inflation hedge
      5. Illiquidity
      6. Risks
      7. Real estate diversification
      8. The role of real estate in portfolios
      9. Portfolio construction and property
      10. Property indices
      11. Historical return and risk of property
      12. Conclusions
      13. Summary
    3. Chapter 6: Commodities
      1. Access
      2. Commodity management styles
      3. Commodity indices
      4. The reasons for investing in commodities
      5. Risks
      6. Cornering the market
      7. Socially responsible investing (SRI) and commodities
      8. Individual commodity assets
      9. Commodity prices and the US dollar
      10. Historic return and risk characteristics of commodities
      11. Conclusions
      12. Summary
    4. Chapter 7: Private equity
      1. Venture capital
      2. Expansion or growth capital
      3. Leveraged buyouts
      4. Distressed investments
      5. Mezzanine capital
      6. Access
      7. Investment vehicle and structure
      8. Illiquidity
      9. Private versus public equity
      10. The success of private equity investing
      11. Expected return
      12. The reasons for investing in private equity
      13. Risks
      14. Role in portfolios
      15. Secondary market
      16. Private equity indices
      17. Private equity return and risk characteristics
      18. Conclusions
      19. Summary
    5. Chapter 8: Hedge funds
      1. Hedge fund performance
      2. Hedge fund fees
      3. Hedge fund strategies
      4. Funds of hedge funds
      5. Role of hedge funds in portfolios
      6. Risks of investing in hedge funds
      7. Construction of hedge fund portfolios
      8. Hedge fund replication
      9. Expected returns
      10. Hedge fund indices
      11. Hedge fund historical return and risk characteristics
      12. Managed futures
      13. Conclusions
      14. Summary
  10. Part IV. New Alternative Investments
    1. Introduction
      1. Alternative alternatives
      2. Summary
    2. Chapter 9: Currency
      1. History
      2. Determinants of exchange rate
      3. Reasons for investing in currencies
      4. Risks
      5. Pegged currencies
      6. Currency mandates
      7. Active currency investment strategies
      8. Currency historical return and risk characteristics
      9. Conclusions
      10. Summary
    3. Chapter 10: Infrastructure
      1. Access
      2. Government involvement
      3. Infrastructure and other asset classes
      4. Phases of infrastructure investing
      5. Reasons for investing in infrastructure
      6. Role of infrastructure in portfolios
      7. Risks
      8. Infrastructure indices
      9. Capital market assumptions for infrastructure
      10. Manager selection
      11. Infrastructure return and risk characteristics
      12. Conclusions
      13. Summary
    4. Chapter 11: Structured finance
      1. Asset-backed securities (ABS)
      2. MBS and the financial crisis
      3. Risks
      4. Role of ABS in a portfolio
      5. ABS return and risk characteristics
      6. Covered bonds
      7. Access
      8. Conclusions
      9. Summary
    5. Chapter 12: Leveraged loans
      1. Introduction
      2. Comparing loans and bonds
      3. Benchmark
      4. Role of loans in a portfolio and their risks
      5. Access
      6. Leveraged loan return and risk characteristics
      7. Conclusions
      8. Summary
    6. Chapter 13: Structured products
      1. Introduction
      2. Risks
      3. Role in portfolio
      4. Conclusions
      5. Summary
    7. Chapter 14: Alternative betas
      1. Understanding alternative equity betas
      2. Evaluating alternative beta strategies
      3. Risks
      4. Conclusions
      5. Summary
    8. Chapter 15: Volatility
      1. The Volatility Index (VIX)
      2. Access
      3. Trading strategies
      4. Fat-tail hedging
      5. Conclusions
      6. Summary
    9. Chapter 16: Art
      1. Valuing art
      2. The reasons for investing in art
      3. Risks
      4. Characteristics of the art market
      5. Access
      6. Art return and risk characteristics
      7. Other art
      8. Conclusions
      9. Summary
    10. Chapter 17: Insurance-linked securities (ILS)
      1. Catastrophe bonds
      2. ILS derivatives
      3. The reasons for investing in ILS
      4. Risks
      5. Cat bonds return and risk characteristics
      6. Life settlements
      7. Conclusions
      8. Summary
    11. Chapter 18: Timber
      1. Timber Index
      2. Conclusions
      3. Summary
  11. Conclusion
  12. Bibliography