Plain-English definitions of the alternative-investment terms for CAIA study. Simplified for learning; the CAIA Association’s curriculum is authoritative.
| Term | Definition |
|---|---|
| Alternative investment | An asset outside traditional stocks, bonds and cash. |
| Hedge fund | A pooled fund using a wide range of strategies, often with leverage. |
| Private equity | Investing in private companies (buyout, venture, growth). |
| Private credit / debt | Lending outside public bond markets, such as direct lending. |
| Real assets | Tangible assets such as real estate, infrastructure and commodities. |
| Structured product | A security built from other assets, often via securitisation. |
| General Partner (GP) | The manager of a private fund. |
| Limited Partner (LP) | An investor in a private fund. |
| Carried interest | The GP’s share of profits above a hurdle. |
| Hurdle rate | The return an LP must earn before the GP shares profits. |
| J-curve | The early dip then rise in private-equity returns over a fund’s life. |
| Illiquidity premium | Extra expected return for holding hard-to-sell assets. |
| Lock-up | A period during which investors cannot redeem. |
| Fund of funds | A fund that invests in other funds. |
| Due diligence | The review of a manager or investment before committing. |
| Alpha | Return above a benchmark. |
| Beta | Sensitivity of returns to a market factor. |
| Vintage year | The year a private fund starts investing. |