The State of Alternative Investments: A Global View · Credit Suisse Hedge Fund Index JPM Global...

The State of Alternative

Investments: A Global View

Keith Black, PhD, CFA, CAIA

Showcase your Knowledge @CAIA_Keith Black@CAIAAssociation

State of Alternative Investment – 2

About CAIA Association

The global leader in alternative investment education

▪ Non-profit established in 2002, based in Amherst, MA, with

offices in Hong Kong, Singapore, Geneva, and London

▪ Over 9,000 current charterholders in more than 90 countries

▪ 30 vibrant chapters located in financial centers around the

world

▪ More than 150 educational and networking events each year

▪ Excellence in AI education through the CAIA designation and

the Fundamentals of Alternatives certificate program


Alternative Investment Education

Alternatives currently represent over $14 trillion in assets

under management, while assets in liquid alternatives

have grown substantially.

The CAIA Association Mission:▪ Establish the CAIA designation as the benchmark for alternative

investment education worldwide

▪ Promote professional development through continuing education,

innovative research and thought leadership

▪ Advocate high standards of professional ethics

▪ Connect industry professionals globally


The CAIA Charter Designation

▪ Globally recognized credential for professionals

managing, analyzing, distributing, or regulating

alternative investments.

▪ Highest standard of achievement in alternative

investment education.

▪ Comprehensive program comprised of a two-tier

exam process:▪ Level I assesses understanding of various alternative asset classes

and knowledge of the tools and techniques used to evaluate the

risk-return attributes of each one.

▪ Level II assesses application of the knowledge and analytics

learned in Level I within a portfolio management context.

▪ Both levels include segments on ethics and professional conduct.


Fundamentals of Alternative Investments

The Fundamentals of Alternative Investments certificate program provides a foundation of core concepts in alternative investments.

▪ Fundamentals fills a critical education gap for those who need to understand the evolving landscape of alternative investments.

▪ Online, 20-hour, self-paced course

▪ Earns CE hours for the CIMA®, CIMC®, CPWA®, CPA ®, and CFP®

designations

▪ Understand the core concepts in alternative investments

▪ Gain confidence in discussing and positioning alternatives

▪ Industry Credibility: Have your achievements recognized

and your currency elevated in the competitive and

complex alternative investment space;

▪ Specialized Curriculum: The CAIA Level II

exam curriculum is focused on the latest alternative

investment practices and strategies, providing essential

knowledge and skills;

▪ Continued Professional Development: Leverage your

already broad knowledge with specialized education in

the growing alternatives arena;

▪ Career Enhancement: Create pathways to better

positions through expanded knowledge and distinction.

Stackable Credential Pilot Program

Stacking the CAIA designation with your CFA charter offers you:

Eligibility + Application

▪ CFA charterholders in good standing who meet the following criteria are eligible:

▪ No prior CAIA exam history;

▪ Have acquired the CFA digital badge.

▪ Eligible applicants may enroll directly into Level II exam paying both enrollment & exam fee ($400 plus either $1150* or $1250)

▪ *Eligible for early discount, association partner discounts

▪ Candidates may test anywhere globally

MORE INFORMATION AND APPLICATIONCAIA.org/stackable-pilot


Are US Equity Markets “STILL” Rich?

0

5

10

15

20

25

30

35

S&

P 5

00

P/E

Ra

tio

S&P 500 P/E Ratio

Source: CAIA and Bloomberg. Data through December 31, 2018.


How About From This View?

Source: Courtesy of Robert Shiller from his book, Irrational Exuberance. Data through January 7, 2019

0

5

10

15

20

25

30

35

40

45

50

1/1

/19

62

9/1

/19

63

5/1

/19

65

1/1

/19

67

9/1

/19

68

5/1

/19

70

1/1

/19

72

9/1

/19

73

5/1

/19

75

1/1

/19

77

9/1

/19

78

5/1

/19

80

1/1

/19

82

9/1

/19

83

5/1

/19

85

1/1

/19

87

9/1

/19

88

5/1

/19

90

1/1

/19

92

9/1

/19

93

5/1

/19

95

1/1

/19

97

9/1

/19

98

5/1

/20

00

1/1

/20

02

9/1

/20

03

5/1

/20

05

1/1

/20

07

9/1

/20

08

5/1

/20

10

1/1

/20

12

9/1

/20

13

5/1

/20

15

1/1

/20

17

9/1

/20

18

Shiller PE Ratio for the S&P 500


Fixed Income 30+ Year Bull Market

-2

0

2

4

6

8

10

12

14

16

18

Yie

ld

German Bund 10 Year US 10 Year

Source: CAIA and Bloomberg. Data through December 31, 2018


Asset Class Performance

Source: CAIA and Bloomberg. Quarterly returns. Annualized volatility and max draw-down are from December 2006 – September 2018

Ending

Sept

2018

1 Yr 5 Yr 10 Yr Ann. Vol

Draw-

down

S&P 500 17.9% 13.9% 12.0% 15.2% -45.8%

Barclays US Aggregate -1.2% 2.2% 3.8% 3.3% -3.0%

US 60/40 10.0% 9.2% 9.0% 8.8% -27.4%

MSCI World 11.2% 9.3% 8.6% 16.4% -49.0%

Barclays Global Aggregate -1.3% 0.8% 2.9% 6.0% -7.2%

Global 60/40 6.1% 5.9% 6.6% 10.5% -30.9%

Bloomberg Commodities 2.6% -7.2% -6.2% 18.9% -65.9%

HFRI Fund Weighted Composite 4.0% 4.1% 4.6% 7.1% -19.0%

NCREIF Timberland 4.0% 6.0% 4.0% 4.5% -5.7%

NCREIF Farmland 6.8% 9.9% 11.6% 5.3% 0.0%

NCREIF Property 7.2% 9.6% 6.4% 5.4% -23.9%

Cambridge Associates US Private Equity 18.7% 13.5% 12.0% 8.7% -25.1%

Cambridge Associates US Venture Capital 19.7% 15.0% 11.0% 8.0% -18.4%

Global Invested Alternative Assets Portfolio 9.6% 9.1% 7.7% 6.6% -21.9%

US 40% Stocks/40% Bonds/20% Portfolio 8.4% 8.2% 8.1% 7.0% -21.9%

Global 40% Stocks/40% Bonds/20% Portfolio 5.8% 5.9% 6.4% 8.5% -25.1%


Public Pension Investment Returns Assumptions

▪ Nearly three-fourths of

Public Pensions have

reduced their investment

return assumption since

fiscal year 2010, resulting in

a decline in the average

return assumption from 7.9%

to 7.5%.

▪ Should projected returns

continue to decline,

investment return

assumptions are likely to

also to continue their

downward trend.


Market Size of Investments

Source: 2016 Estimates from Aon Hewitt, HFR, Barclays, Preqin

Traditional

Investments

Alternative

Investments

U.S. Equity $21,100 Private Equity $4,200

Other Developed Market Equity $15,100 Hedge Funds $3,000

Emerging and Frontier Market Equity $4,100 Real Estate Equity $6,700

Emerging Market Debt $3,000 Infrastructure, Farmland, Timberland,

and Private Energy$620

High Yield Bonds and Bank Loans $3,200 Commodity swaps, ETPs and MTNs $230

Dollar Bonds $19,300

Real Estate Debt $6,000

Other Bonds $21,100

Cash $5,100

Total (in $billions) $98,000 Total $14,750


Participation In Alternatives

Source: Preqin Investor Outlook: Alternative Assets, H2 2018


Institutional Investor Allocation



Alternative Investment Allocations

▪ The largest endowments have average allocations of: ▪ 13% US equity, 19% non-US equity, 11% in fixed income and cash

▪ 24% hedge funds, 19% PE/VC, 14% real assets

Source: NACUBO-Commonfund Study of Endowments, 2017

0%

5%

10%

15%

20%

25%

30%

Real Estate Hedge Funds Private Equity + Venture

Capital

Natural Resources

2002 2004 2006 2008 2010 2012 2014 2016 2017


Average SWF Asset Allocation

Source: “How do Sovereign Wealth Funds Invest? Shift into Private Markets Continues,” E. Hentov, State Street Global Advisors, January 2018

48.544.6

33.5 35.8 32.8

35.339

41 38.638.5

16.2 16.5

25.4 25.6 28.7

0

10

20

30

40

50

60

70

80

90

100

2002 2007 2012 2014 2016

Cash and Fixed Income Equities Private Markets


Avg. Asset Allocation by Investor Type

Source: Preqin 2016

5.4%

11.0%

7.9%

2.5%

5.8%

8.3%

9.0%

3.2%

6.3% 6.2%

7.4%

N/A

11.0%

19.0%

6.0%

3.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Private Equity Hedge Funds Real Estate Infrastructure

Private Pensions Public Pensions Sovereign Wealth Funds Endowments and Foundations


Energy

63%

Grains,

Meats, Softs

22%

Precious

Metals

4%

Industrial

Metals

11%

S&P GSCI Commodity Index,

2019 Target Weights

Commodity Futures Indices

Energy

30%

Grains,

Meats, Softs

36%

Precious

Metals

16%

Industrial

Metals

18%

Bloomberg Commodity Index,

2019 Target Weights


Performance in the Worst of Times

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

S&P 500 MSCI World Index S&P GSCI Bloomberg

Commodity

Credit Suisse Hedge

Fund Index

JPM Global

Aggregate Bond

Credit Suisse

Managed Futures

Barclays Capital U.S.

Aggregate Bond

Average Index Performance During the Largest Monthly S&P 500 Decline

Each Year From Jan. 1994 to Dec. 2018

Source: CAIA and Bloomberg


Trends in Correlation

(0.40)

(0.20)

0.00

0.20

0.40

0.60

0.80

1.00

1/1

/199

4

3/1

/199

5

5/1

/199

6

7/1

/199

7

9/1

/199

8

11

/1/1

999

1/1

/200

1

3/1

/200

2

5/1

/200

3

7/1

/200

4

9/1

/200

5

11

/1/2

006

1/1

/200

8

3/1

/200

9

5/1

/201

0

7/1

/201

1

9/1

/201

2

11

/1/2

013

1/1

/201

5

3/1

/201

6

5/1

/201

7

7/1

/201

8

Bloomberg Commodity Index

vs. S&P 500 Index

3-Year Rolling Correlation

Source: CAIA and Bloomberg. Data through December 2018

(0.20)

0.00

0.20

0.40

0.60

0.80

1.00

1/1

/199

4

3/1

/199

5

5/1

/199

6

7/1

/199

7

9/1

/199

8

11

/1/1

999

1/1

/200

1

3/1

/200

2

5/1

/200

3

7/1

/200

4

9/1

/200

5

11

/1/2

006

1/1

/200

8

3/1

/200

9

5/1

/201

0

7/1

/201

1

9/1

/201

2

11

/1/2

013

1/1

/201

5

3/1

/201

6

5/1

/201

7

7/1

/201

8

Bloomberg Commodity Index

vs. Sub-Indices

3-Year Rolling Correlation

Precious Metals Industrial Metals Agriculture Energy


Potential Demand: Rebalancing from Equities

▪ Commodity prices have declined while equity markets have risen sharply

Source: Bloomberg & CAIA


Key Issues Hedge Funds in 2018


69%

56%

41%

39%

31%

24%

20%

19%

11%

11%

Performance

Fees

Ongoing Volatility

in Global Markets

Public Perception

of Industry

Regulation

Notable Investors

Exiting the Asset Class

Transparency

Portfolio Management

Pricing/Valuations

Governance

Pro

po

rtio

n o

f R

esp

on

de

nts


Estimated Hedge Fund AUM Growth

$3,244.3

($500)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

Q3

2018

Estimated Assets Estimated Asset Flow

Source: HFR® Global Hedge Fund Industry Report – Third Quarter 2018 | Copyright 2018. All rights reserved. | www.HedgeFundResearch.com


Estimated Alternative UCITS AUM Growth

Source: LuxHedge Alternative UCITS database. Data as of August 31, 2018

0 €

50 €

100 €

150 €

200 €

250 €

300 €

350 €

400 €

450 €

500 €

AU

M (

Mio

Eu

r)


Liquid Alternative Market Growth

Source: CAIA and Morningstar

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Real estate-linked Nontraditional bond Bear Market Commodity Currency

Equity Market Neutral Long/Short Equity Managed Futures Multialternative


Estimated Number of Funds: HF vs. FoF

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

Q3

2018

FoF HF



Funds with Inflows vs. Outflows

Outflows

53.05%

Inflows

46.95%

Single-Manager Funds

Outflows

67.57%

Inflows

32.43%

Fund of Funds



Distribution of Industry Assets: Firm AUM Tier

46.08%

14.74%

11.37%

7.89%

13.96%

5.96%

By # of Firms

< $100 Million $100 to $250 Million $250 to $500 Million

$500M to $1 Billion $1to $5 Billion > $5 Billion

1.09%1.76% 2.98%

4.12%

24.63%

65.42%

By Firm AUM Size

< $100 Million $100 to $250 Million $250 to $500 Million

$500M to $1 Billion $1to $5 Billion > $5 Billion



Hedge Fund Fee Structures Sought by Investors

Source: Preqin

29%

31%

37%

48%

55%

0% 10% 20% 30% 40% 50% 60%

Clawback

1 or 30 Fee Structure

Tiered Fee Levels

High-Water Mark

Hurdle Rate

Propostion of Respondents


Rising Sector Dispersion

Source: CAIA and Bloomberg. Data through January 3, 2019

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

Gro

wth

of

$1

with

th

e S

&P

50

0 T

R

Co

rre

lati

on

3 Year Rolling Correlation with S&P 500 Index

0.91 - Technology

0.9 - Industrials

0.91 - Consumer Discretionary

0.83 - Financials

0.83 - Materials

0.83 - Health Care

0.75 - Average

0.64 - Consumer Staples

0.68 - Energy

0.25 - Utilities

2.12 - Growth $1 of SPX


Private Capital AUM by Asset Class

Source: Preqin Online Products

700 736 750851

941

1,212

1,668

2,231 2,2522,449

2,748

3,020

3,265

3,7723,908

4,217

4,540

5,216

5,826

0

1,000

2,000

3,000

4,000

5,000

6,000

Ass

ets

un

de

r M

an

ag

em

en

t ($

bn

)

Private Equity Private Debt Real Estate Infrastructure Natural Resources


Private Capital Dry Powder by Asset Class


$292$369 $397 $395 $399

$551

$788

$992$1,065 $1,055

$983 $1,000$943

$1,226 $1,222

$1,362

$1,507

$1,779

$2,099

-200

300

800

1,300

1,800

2,300

Dry

Po

wd

er ($

bn

)

Private Equity Real Estate Infrastructure Private Debt Natural Resources Total


Private Equity Assets Under Management

Source: Preqin Private Equity Online

577 589 593657

707

880

1,153

1,467 1,420

1,572

1,7201,792

1,936

2,1772,227

2,368

2,560

3,060

3,411

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Ass

ets

un

de

r M

an

ag

em

en

t ($

bn

)

Dry Powder ($bn) Unrealized Value ($bn)


Private Equity Dry Powder by Fund Type


$292

$369$397 $395 $397

$549

$785

$983$1,048 $1,043

$967 $982$920

$1,168 $1,170

$1,302

$1,443

$1,700

$1,901 $1,903

0

500

1000

1500

2000

Dry

Po

wd

er ($

bn

)

Buyout Distressed PE Growth Mezzanine Other Real Estate Venture


Annual Capital Called up and Distributed by

Private Equity Funds


-200

-100

0

100

200

300

400

500

600

Capital Called up ($bn) Capital Distributed ($bn) Net Cash Flow ($bn)


Venture Capital Public Market Equivalent

Source: Preqin Online Products . As of June 30, 2018

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

PM

E V

alu

e (

X)

Vintage Year

KS PME Using Russell 2000 TR (X)

If PME index value (X) is >1, private equity has outperformed the public market


Venture Capital Deals* Completed Globally


*Figures exclude add-ons, grants, mergers, secondary stock purchases and venture debt.

11 1112 11

13 1312 13

89 9

12 1113

10

13

1618

1614

13

16 1614

12

15 1517

20

28

24

3134

4445

32

4446

36

31

35

50

53 54 53

75

70

76

0

10

20

30

40

50

60

70

80

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

20

07 Q

1

20

07 Q

2

20

07 Q

3

20

07 Q

4

20

08 Q

1

20

08 Q

2

20

08 Q

3

20

08 Q

4

20

09 Q

1

20

09 Q

2

20

09 Q

3

20

09 Q

4

20

10 Q

1

20

10 Q

2

20

10 Q

3

20

10 Q

4

20

11 Q

1

20

11 Q

2

20

11 Q

3

20

11 Q

4

20

12 Q

1

20

12 Q

2

20

12 Q

3

20

12 Q

4

20

13 Q

1

20

13 Q

2

20

13 Q

3

20

13 Q

4

20

14 Q

1

20

14 Q

2

20

14 Q

3

20

14 Q

4

20

15 Q

1

20

15 Q

2

20

15 Q

3

20

15 Q

4

20

16 Q

1

20

16 Q

2

20

16 Q

3

20

16 Q

4

20

17 Q

1

20

17 Q

2

20

17 Q

3

20

17 Q

4

20

18 Q

1

20

18 Q

2

20

18 Q

3

20

18 Q

4

Ag

gre

ga

te D

ea

l Va

lue

($

bn

)

No

. o

f D

ea

ls

No. of Deals Aggregate Deal Value ($bn)


Number of Venture Capital Deals* by Region

Source: Preqin Private Equity Online.


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,50020

07 Q

1

20

07 Q

2

20

07 Q

3

20

07 Q

4

20

08 Q

1

20

08 Q

2

20

08 Q

3

20

08 Q

4

20

09 Q

1

20

09 Q

2

20

09 Q

3

20

09 Q

4

20

10 Q

1

20

10 Q

2

20

10 Q

3

20

10 Q

4

20

11 Q

1

20

11 Q

2

20

11 Q

3

20

11 Q

4

20

12 Q

1

20

12 Q

2

20

12 Q

3

20

12 Q

4

20

13 Q

1

20

13 Q

2

20

13 Q

3

20

13 Q

4

20

14 Q

1

20

14 Q

2

20

14 Q

3

20

14 Q

4

20

15 Q

1

20

15 Q

2

20

15 Q

3

20

15 Q

4

20

16 Q

1

20

16 Q

2

20

16 Q

3

20

16 Q

4

20

17 Q

1

20

17 Q

2

20

17 Q

3

20

17 Q

4

20

18 Q

1

20

18 Q

2

20

18 Q

3

20

18 Q

4

No

. o

f D

ea

ls

North America Europe Asia ROW


Aggregate Value of Venture Capital Deals*

by Region

Source: Preqin Private Equity Online.


0

10

20

30

40

50

60

70

80

20

07 Q

1

20

07 Q

2

20

07 Q

3

20

07 Q

4

20

08 Q

1

20

08 Q

2

20

08 Q

3

20

08 Q

4

20

09 Q

1

20

09 Q

2

20

09 Q

3

20

09 Q

4

20

10 Q

1

20

10 Q

2

20

10 Q

3

20

10 Q

4

20

11 Q

1

20

11 Q

2

20

11 Q

3

20

11 Q

4

20

12 Q

1

20

12 Q

2

20

12 Q

3

20

12 Q

4

20

13 Q

1

20

13 Q

2

20

13 Q

3

20

13 Q

4

20

14 Q

1

20

14 Q

2

20

14 Q

3

20

14 Q

4

20

15 Q

1

20

15 Q

2

20

15 Q

3

20

15 Q

4

20

16 Q

1

20

16 Q

2

20

16 Q

3

20

16 Q

4

20

17 Q

1

20

17 Q

2

20

17 Q

3

20

17 Q

4

20

18 Q

1

20

18 Q

2

20

18 Q

3

20

18 Q

4

Va

lue

of

De

als

$b

n

North America Europe Asia ROW


Unlisted Natural Resources Dry Powder by

Primary Strategy

Source: Preqin Natural Resources Online

1 2 3 2 3 3 5 6 9 8 10 87 9 6 8 7 8 5 911 11 11 10

40

63 73 70 7078

91

111

123135

163

152

1

22 1 2

2

4

8

7

5

6

6

0

12 2 3

4

4

5

4

5

5

4

0

0

0 0 0

1

0

1

0

1

1

1

0

50

100

150

200

250

Water

Timberland

Metals & Mining

Energy

Diversified

Natural Resources

Agriculture/

Farmland


Unlisted Natural Resources Funds in Market by

Primary Geographic Focus

Source: Preqin Natural Resources Online. As of January 2018

112

54

17

58

67

27

9

22

0

20

40

60

80

100

120

North America Europe Asia Rest of World

No. of Funds Raising Aggregate Capital Targeted ($bn)


Natural Resources


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Agriculture/

Farmland

Conventional

Energy

Renewable

Energy

Metals &

Mining

Timberland Water

Sectors that Investors View as Presenting the Best Opportunities, 2016 vs.

2017

12/1/2016 12/1/2017


Private Debt Assets under Management

Source: Preqin

0

100

200

300

400

500

600

700

800

Ass

ets

Un

de

r M

an

ag

em

en

t ($

bn

)


17x Growth Over 18 Years


Private Debt AUM by Fund Type

Source: Preqin, June 2017

0

50

100

150

200

250

Direct Lending Distressed Debt Mezzanine Special Situations Venture Debt



Private Debt Geographic Focus

Source: Preqin

178

82

31

44

88

42

11 8

0

20

40

60

80

100

120

140

160

180

200


Private Debt Funds in Market by Primary

Geographic Focus (As of January 2018)

No. of Funds Raising Aggregate Capital Targeted ($bn)

62%58% 57%

26%

25% 24%

6%9% 11%

6% 8% 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan-16 Jan-17 Jan-18

Make-up of Investors in Private Debt

by Location



Key Challenges Facing Unlisted Infrastructure

Managers in 2018

Source: Preqin Fund Manager Survey, November 2017

19%

19%

20%

20%

20%

23%

33%

36%

59%

0% 10% 20% 30% 40% 50% 60% 70%

Fulfilling Investor Demand

Volatility/Uncertainty in Global Markets

Fundraising

Interest Rates

Performance

Fee Pressure

Deal Flow

Regulation

Valuations

Proportion of Respondents


Unlisted Infrastructure AUM


$7 $7 $7 $8$17 $24

$54

$101$118

$129

$167

$211$222

$272$292

$318

$379

$451

$496

0

100

200

300

400

500

600

Ass

ets

un

de

r M

an

ag

em

en

t ($

bn

)

Dry Powder ($bn) Unrealized Value ($bn) Total


Investor Preference

Source: Preqin Investor Interviews, December 2017

13%

18%

28%

37%

44%

46%

49%

0% 10% 20% 30% 40% 50% 60%

Social

Waste Management

Telecommunications

Utilities

Transport

Renewable Energy

Energy (Excl. Renewables)


Sectors that Investors View as Presenting the Best Opportunities

9%

12%

14%

28%

36%

36%

47%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Secondaries

Debt

Fund of Funds

Value Added

Core-Plus

Opportunistic

Core


Strategies that Investors View as Presenting the Best Opportunities


Open-Ended Infrastructure Fund Launches

Source: Preqin Infrastructure Online

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

No. of Funds Already in Market No. of Funds Launched No. of Funds Liquidated


Key Challenges Facing Private Real Estate

Managers in 2018

Source: Preqin Fund Manager Survey, November 2017

10%

11%

15%

16%

19%

19%

24%

24%

33%

37%

62%

0% 10% 20% 30% 40% 50% 60% 70%

Fee Pressure

Fulfilling Investor Demands

Availability/Pricing of Debt Financing

Regulation

Fundraising

Exit Environment

Volatility/Uncertainty in Global Markets

Performance

Interest Rates

Deal Flow

Valuations



Performance: PrEQin Index by Asset Class

Source: Preqin Real Estate Online

0

50

100

150

200

25012

/1/2

007

3/1

/200

8

6/1

/200

8

9/1

/200

8

12

/1/2

008

3/1

/200

9

6/1

/200

9

9/1

/200

9

12

/1/2

009

3/1

/201

0

6/1

/201

0

9/1

/201

0

12

/1/2

010

3/1

/201

1

6/1

/201

1

9/1

/201

1

12

/1/2

011

3/1

/201

2

6/1

/201

2

9/1

/201

2

12

/1/2

012

3/1

/201

3

6/1

/201

3

9/1

/201

3

12

/1/2

013

3/1

/201

4

6/1

/201

4

9/1

/201

4

12

/1/2

014

3/1

/201

5

6/1

/201

5

9/1

/201

5

12

/1/2

015

3/1

/201

6

6/1

/201

6

9/1

/201

6

12

/1/2

016

3/1

/201

7

6/1

/201

7

Ind

ex R

etu

rn

(Re

ba

sed

to

100 a

s o

f 3

1-D

ec

-2007

PrEQIn Real Estate PrEQIn Private Equity PrEQIn Infrastructure PrEQIn Private Debt MSCI US REIT


0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

PM

E V

alu

e (

X)

KS PME Using MSCI US REIT KS PME Using S&P 500 TR

Real Estate: Public Market Equivalent (PME)

Source: Preqin Real Estate Online, All Regions. As of June 30, 2018

If PME value (X) is >1, private real estate has outperformed the public market


US Average Cap Rate vs. US 10 Year Yield

Source: CAIA and Bloomberg. Data through November 2018

0

2

4

6

8

10

12

1/1/2001 1/1/2003 1/1/2005 1/1/2007 1/1/2009 1/1/2011 1/1/2013 1/1/2015 1/1/2017

Yie

ld

Spread US Avg. Cap Rate US 10 Year Yield

Global Cap Rates: 3Q 2017

Europe

Office Retail Industrial

Low High QoQ Low High QoQ Low High QoQ

Berlin 3% 5% Down 3.2% 4% Down 4.7% 6.0% Down

Frankfurt 3.80% 8.40% Down 3% 4% Down 4.70% 4.7% Down

London 4% 4.5% Up 2.0% 4.0% Up 4% 5% -

Munich 3.0% 5% - 3% 6% Down 4% 6.5% Down

Paris 3.00% 3.50% Down 3.00% 4.00% 5.50% 6.50% Up

APAC



Hong Kong 3% 4% Down 2.5% 4% 3.5% 4.5% -

Shanghai 3.50% 4.50% Down 4% 6% Down 5.75% 6.8% Down

Singapore 4% 4.0% - 4.5% 5.0% 6% 7% -

Sydney 4.8% 5% Down 4% 6% 5% 6.5% -

Tokyo 3.50% 4.50% - 4.00% 5.00% 4.00% 5.50% Down

Americas



Chicago 4% 6% Down 4.5% 7% - 4.5% 6.5% -

Los Angeles 4.25% 7.75% Up 4% 7% Up 3.75% 6.5% Up

New York 3% 4.5% - 3.5% 5.5% - 3% 7% -

San Francisco 3.5% 7% - 3% 6% - 4% 6.5% Down

Toronto 3.75% 4.75% - 4.25% 5.25% - 4.75% 5.25% Down

Source: Global Cap Rate Report | Q3 2017 | Valuation and Advisory Services | Colliers International. Cap Rates are gross yields for Class A assets in prime

locations in their class in the respective locations based on survey results from professional valuers / appraisers.


Closed-End Private Real Estate AUM


20 36 38 38 5395

129165 168 176 149 160 134

200 194228 237

281323

4342 39 58

68

91

143

241 228 215296

391 452

501550

573 542

532

586

0

100

200

300

400

500

600

700

800

900

1000

Ass

ets

un

de

r M

an

ag

em

en

t ($

bn

)



Closed-End Private Real Estate Dry Powder by

Strategy


0

20

40

60

80

100

120

Value Added Opportunistic Core-Plus Debt Core Distressed


Structured Products

Post Dodd-Frank, OTC trades are increasingly using central clearing to report

and margin transactions in CDS indices, as well as single name corporate

and sovereign CDS.

Source: ICE


U.S. CMBS Issuance By Year

Source: CRE Finance Council

48

66

54

78

94

168

203

230

12

311

30

44

80

9095

68

87

53

0

50

100

150

200

250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Bill

ion

s


Historical U.S. CLO Issuance

Source: The Royal Bank of Scotland, Fitch Ratings, and LCD, and offering of S&P Global Market Intelligence. Data thru December 7, 2018

1.74.5

9.914.2 15.8

13.8 15.4 15.1

27.6

46.3

79.8

92.6

19

0.33.3

12.9

51.9

80.2

116.2

93.1

63.5

118

125

0

20

40

60

80

100

120

140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$, B

il

March 2019 Exam

The Global Benchmark In Alternative

Investment Education

The CAIA Charter

Global Presence

Member Asset Class Focus and Regional Distribution

Data: CAIA Member Survey

Hedge Funds 54%

Private Equity 46%

Fixed Income Alternatives 44%

Real Estate 41%

Commodities 32%

Real Assets Infrastructure, Farmland, Timberland 30%

Structured Products 29%

Managed Futures 25%

Venture Capital 23%

0 18 35 53 70

55%

13%

32%Americas

Asia-Pacific

Europe, Middle-East, Africa

CAIA Members work across a variety of asset classes globally.

Membership Growth

*2018 Data through May 2018

561

3,265

5,700

9,000

0

2,000

4,000

6,000

8,000

10,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Level I Curriculum – Third Edition

Core Concepts

▪ Professional Standards & Ethics

▪ Introduction to Alternative

Investments

▪ Real Assets

▪ Hedge Funds

▪ Private Equity

▪ Structured Products

▪ Risk & Portfolio Management

Level II Curriculum – Third Edition

Advanced Core Concepts

▪ Professional Standards & Ethics

▪ Venture Capital & Private Equity

▪ Hedge Funds & Managed Futures

▪ Real Estate/Real Assets

▪ Commodities

▪ Structured Products

▪ Manager Selection, Due Diligence &

Regulation

▪ Research Issues & Current Topics

▪ Risk & Risk Management

▪ Asset Allocation & Portfolio

Management

Current & Integrated

Topics Available

Free at

caia.org

Level I TopicApproximate Exam

Weight

Professional Standards and Ethics 15% – 20%

Introduction to Alternative Investments 20% – 25%

Real Assets including Commodities 10% – 20%

Hedge Funds 10% – 20%

Private Equity 5% – 10%

Structured Products 10% – 15%

Risk Management and Portfolio Management 5% – 10%

Level I Exam Topics

Level II Topic Approximate Exam Weight

Multiple Choice Constructed Response

Professional Standards and Ethics 0% 10%

Current and Integrated Topics 0% 10%

Asset Allocation and Institutional Investors 8-12% 0-10%

Private Equity 11-15% 0-10%

Real Assets 13-17% 0-10%

Commodities 5-7% 0-10%

Hedge Funds and Managed Futures 18-22% 0-10%

Structured Products 5-7% 0-10%

Level II Exam Topics

Examination Format and Scheduling

Level I

Section 1: 100 questions / 120 minutes


Both CAIA exams are administered

internationally in computerized format

exclusively at proctored Pearson VUE

test centers.

Level II


Section 2: 3 essays / 120 minutes

Once you have purchased your Level I or

Level II exam, you will receive a

confirmation email with a link that will

allow you to schedule your exam

appointment.

▪ Study guides outlining keywords and learning objectives

▪ Workbooks with sample exercises

▪ Candidate orientation sessions

▪ Study calculator to plan your course of study

▪ Third party preparatory course and programs

▪ Level I & Level II sample exams

Candidate Support & Tools

Visit CAIA.org/preparing

Fees (in USD) Level I Level II Annual Membership (in USD)

Program Enrollment $400 Full $350

Exam Registration $1,250 $1,250 Affiliate $175

TOTAL $1,650 $1,250 Retired $175

Emerging Market* $100

Early Registration Discount -$100 -$100 2-Year Full $650

Retake Fee $450 $450

Curriculum cost (in USD) Level I Level II

Textbook & readings $125 $125

Standards of Practice handbook $0 $0 *Based on MSCI Emerging Market

Indices

Fees

Pass Rates

67% 66% 66%

59%61%

63%60%

64%66%68% 67%

70%66%

59%57% 58%

0%

20%

40%

60%

80%

100%

Level I

Level II

CAIA Charter

Academic Partnerships – Americas (partial list)

A complete list of CAIA’s academic partners globally can be found at caia.org.

Academic Partnerships – EMEA (partial list)

Academic Partnerships – APAC (partial list)

A complete list of CAIA’s academic partners globally can be found at caia.org.

Association Partnerships

Banks Consultants Fund Managers RegulatorsPension Funds &

Endowments

HSBC

Citi

Credit Suisse

UBS

Barclays Capital

Deutsche Bank

CambridgeAssociates

New England Pension Consultants

Mercer

Willis Towers Watson

Blackrock

Goldman Sachs

J.P. Morgan

Morgan Stanley

State Street

U.S. SEC

MAS Singapore

SFC Hong Kong

FCA UK

CIMA Cayman

APG

Teacher RetirementSystem of Texas

Chicago Teachers

Ontario Teachers

CalPERS

Harvard Management Co.

Sample Employers

Top companies seek to hire CAIA Charterholders.Sample job postings from the CAIA Career Center

International Relationship Manager. CFA, CAIA or working toward preferred.

Equity Investment Research -Manager. CIMA, CAIA, and/or CFA charter holders or candidates will be looked favorably upon.

International Trading ManagerMBA, CFA, CAIA or CMT preferred

CAIA is Preferred

Senior Quantitative Research Analyst. CFA, CAIA, CIMA

Senior Credit SpecialistCFA / CAIA / FRM / PRM is considered highly advantageous.

Risk Management - AssociateIndustry certifications, such as a CFA, CAIA, or FRM, are a plus.

▪ Use of CAIA marks in professional documents

▪ Chapter educational and networking events

▪ Global network of more than 9,000 Members

▪ Globally-recognized designation

▪ Education and Research at CAIA.org

▪ Self-evaluation Tool

▪ Ongoing Education

▪ CAIA Career Center

Member Benefits

Early

Registration

Oct 1 – Nov 12, 2018

Regular

Registration

Nov 13 – Feb 4, 2019

Level I Exam

Feb 25 – Mar 8, 2019

Level II Exam

Mar 11 – 22, 2019

OCT NOV DEC JAN FEB MAR

Exams March 2019 – Notable Dates

AMERICAS

Millissa Allen, CAIAAmherstManaging Director of Business Developmentdirect: +1 413 549 [email protected]

Cody DurantAmherst

Assistant Director of Business Developmentdirect: +1 413 549 3313 [email protected]

EUROPE, MIDDLE-EAST, AFRICA

Laura Merlini, CAIAGenevaManaging Director of Business Developmentdirect: +41 796 154 [email protected]

Tammy JohnstonLondonGlobal Business Development [email protected]

ASIA-PACIFIC

Joanne MurphyHong KongManaging Director, APACdirect: +852 3752 [email protected]

Peter Douglas, CAIASingapore

Director, CAIA Foundationdirect: +65 6536 4241 [email protected]

Shreekant Daga, CAIAIndiaAssociate Director, Liaison Office, IndiaDirect: +91 90043 [email protected]

Global Business Development Contacts

mailto:[email protected]







www.caia.org

The Global Benchmark In Alternative

Investment Education

The CAIA Charter

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