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Based on actual trading prices of REIT shares
- ETFs - Commodity linked equities - Managed futures funds - Derivatives
- Based on corporate restructuring that creates profit opportunities -
Examples - merger arbitrage, distressed/restructuring, activist
shareholder, special situations (e.g. spinoffs, asset sales)
- May be misleading for two key reasons -- Return distributions are
not approximately normal but rather leptokurtic and negatively skewed --
Returns are smoothed so std. devs. are understated- Tend to bias Sharpe
measures upward
- Contango - when future prices for commodities are higher than spot
prices (very unusual) - results from little or no convenience yield -
Backwardation - when future prices are less than spot prices - results
from high convenience yield
- PE firms may make 20% of profit after initial capital has been
returned to investors - Clawback provision requires manager to return
any periodic incentive fees to investors that would result in investors
not getting 80%
- Hedge funds- Private equity funds - Real estate- Commodities
- Based on price changes for properties that have sold multiple times -
May not be very representative because not all properties have been
resold
- Historically have a low correlation with traditional investments and
can thus reduce portfolio risk - Have higher returns on average (maybe
because they are less efficiently priced)
- Investment company that invests in hedge funds- LIke a mutual fund of hedge funds
- Comparable sales approach - Income approach - PV of future cash
flows - Cost approach - estimate replacement cost of the property -
include cost of land
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