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Alternative Assets and Strategic Allocation: Rethinking the Institutional Approach

ISBN: 978-0-470-92743-4
509 pages
October 2010
Alternative Assets and Strategic Allocation: Rethinking the Institutional Approach (0470927437) cover image


An insightful guide to making strategic investment allocation decisions that embraces both alternative and conventional assets

In this much-needed resource, alternative and portfolio management expert John Abbink demonstrates new ways of analyzing and deploying alternative assets and explains the practical application of these techniques.

Alternative Assets and Strategic Allocation clearly shows how alternative investments fit into portfolios and the role they play in an investment allocation that includes traditional investments as well. This book also describes innovative methods for valuation as applied to alternatives that previously have been difficult to analyze.

  • Offers institutional investors, analysts, researchers, portfolio managers, and financial academics a down-to-earth method for measuring and analyzing alternative assets
  • Reviews some of the latest alternatives that are increasing in popularity, such as high-frequency trading, direct lending, and long-term investment in real assets
  • Outlines a strategic approach for including alternative investments into portfolios and shows the pivotal role they play in an investment allocation

Using the information found in this book, you'll have a clearer sense of how to approach investment issues related to alternative assets and discover what it takes to make these products work for you.

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Table of Contents

List of Illustrations ix

Acknowledgments xiii

Introduction 1

What Is Alternative about Alternative Investments?  5

The Plan of This Book 11


1 Risk and Return 17

2 Return Enhancement 37

3 Some Features of the Quantitative Toolkit 59

4 Risk Estimation 81


5 Long/Short Equity 103

6 Direct Lending 123

7 Merger Arbitrage 141

8 High-Frequency Trading 161

9 Holding Private Assets for Their Cash Flows 183

10 Fixed-Income Arbitrage 199

11 Event-Driven Investment 217


12 Investment Strategies in Practice 237

13 Optionality 253

14 Trade Capacity 271

15 Institutional Liquidity 287

16 Tactical Allocation 305

17 Portfolio Liquidity 323

18 Alternative Investments and Information Theory 343


19 Classification of Investments 361

20 Diversification among Strategies 381

21 Multi-Dimensional Risk 403

22 Filling Out the Allocation 419

23 Time and Tide 433

24 Managing the Allocation Decision 451

25 Concluding Remarks 469

Bibliography 477

Index 487

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Author Information

JOHN B. ABBINK has twenty-nine years’ experience in investment firms, including Merrill Lynch, Credit Suisse, and Deutsche Bank, and was formerly a senior vice president and director of manager research at National City Corporation. Abbink received his BA from Michigan State University and his PhD from Yale University.
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