Traditional and Alternative Investments

Abstract

While traditional forms of investment products such as public funds still dominate the investment industry, both traditional and alternative investments have experienced recent innovations in their structure. Many of these (structured notes, swaps) are much simpler than they appear, and can offer highly tailored exposure to unique sources of return. Expanding the set of investment opportunities through new structures results in unique return patterns that cannot be replicated through traditional stock, bond, and real estate investment strategies. As a result, these new product forms may increase the economic benefits available to current investors. In this article, the economic bases for new product forms and security design are discussed, and simulation examples of the return opportunities made available through both guaranteed structured notes and swaps are offered.