CFA: Level 1 Alternate Investments

Private Forms of Real Estate Investments (L4)

Debt: Mortgage debt, construction loans, mezzanine debt

Indirect Ownership: Real Estate Funds & Private REITs

Direct Equity Ownership: Sale, Ownership, Limited Partnership, & Joint Ventures

REITS

Preferred investment vehicles for owning income for producing real estate.

Tax Advantage Trusts

• Equity REITs

• Mortgage REITs

• Hybrid REITs

Joint Ventures (L4)

Pooling capital, development expertise, and entrepenurial target.

Distributed Ledger (L7)

A digital database that can be shared with a network of participants. With all transaction entries are recorded, stored, and distributed for all to see, and each individual copy is a verified record of all current and previous transactions.

DTL Basic Elements (L7)

• Digital ledger

• Participant network

• Consensus mechanisms to confirm new entries and transaction validation and agreement to update the ledge by network parties.

Cryptography (L7)

An algorithmic process to encrypt data by making:

• The data unusable if received by unauthorized parties

• Enabling high level of network security and database integrity

• Used to establish proof of identity of network participants.

Smart Contracts (L7)

Computer programs to automate transactions on the network, with prespecified terms and conditions define the automated transactions.

Blockchain (L7)

A global digital ledger that uses a block with transaction information is created & broadcast to the network. The nodes are used to validate, and transaction is combined with other transaction to form a new block.

(PoW) Proof of Work Protocol (L7)

A consensus mechanism to verify transaction, used by miners to validate new transaction and add new transaction blocks to the chain.

This process makes fraud and manipulation difficult and expensive, with success of the network relying upon broad participation.

Truthful Representation (L7)

Represented by the longest chain of blocks in transactions. The need for significant computer power makes it difficult for any individual or organization to falsify ledger transaction.

(PoS) Proof of Stake Protocol (L7)

Requires validators to pledge capital to vouch for a block’s validity.

Has protocols that guards against malicious parties, and confirm the validity and verification of adding new and proposed blocks.

Permissionless Network (L7)

Open to any user who wishes to make a transaction, and all users of the network can see all the network transactions, with no centralized authority needed to make verifications.

The ledger is visible to all so trust between parties is not a requirement, however they do restrict members from certain network activities.

Central Bank Digital Currencies (L7)

A digital version of fiat currencies.

Altcoin (L7)

Other cryptocurrencies, stable coins, and meme coins.

Bitcoin (L7)

The first cryptocurrency launched in 2009.

Cryptocurrencies (L7)

Digital units to store value.

Digital Currency (L7)

Near-real-time transaction without an intermediary.

Tokens (L7)

Represents ownership rights. such as ownership title and authenticity.

Nonfungible Tokens (L7)

A token that link digital assets to certificates.

Security Tokens (L7)

A token that digitize ownership rights to publicly traded securities.

Utility Tokens (L7)

A token that provide services within a network; pay for services.

Governance Tokens (L7)

A token that allows the right to vote how a network is run.

Tokenization (L7)

A process that streamlines the record of ownership verification each time a transfer of ownership takes place.

Fraud and Manipulation (L7)

An investor protection concern that both centralize and decentralize and exchange have potential problems with fraud and manipulation due to lack of regulation and oversight.

Returns of Cryptocurrencies (L7)

• Market adoption, network effects, technological advancement

• Regulatory development

• Speculation and the general appetite for market risk

Diversification of Cryptocurrency (L7)

Have exhibited low correlation with traditional asset classes.

Cryptocurrency Whales (L7)

An investor protection concern that focuses on individuals or entities that hold a large enough holding to manipulate the price.

Pump-and-Dump Schemes (L7)

An investor protection concern that involves a cryptocurrency heavily endorsed by music and sports celebrities, which leads the price to rise rapidly, then cashes as holdings are dumped by executives for a substantial profit.

Loss of Access to Cryptocurrency Wallet (L7)

An investor protection concern that occurs when loss of access to the passkey makes the cryptocurrency irretrievable.

Distinguished Characteristics of Digital Assets (L7)

• No inherent value: Have no income or underlying cash flows.

• Decentralized Ledger: To validate & record transactions; future Web3 system.

• Limited Acceptance: A medium of exchange to date.

• Illegal Activities: Not necessarily prohibited; anonymous transactions.

• Legal & Regulatory Protection: Unclear and ambiguous regulatory treatment.

Ether (L7)

A altcoin launched in 2015 on the ethereum network. Has a programable blockchain, allowing users to construct applications aka smart coins & smart contracts.

Stable coins (L7)

Altcoins that are designed to maintain a sable value, and are collateralized by a basket of assets.

Meme Coins (L7)

An altcoins often inspired by a joke and launched for entertainment purposes.

• Gain popularity in a short time period

• Early puchase may sell at a considerable profit.

Direct Ownership (L7)

A digital asset investment form on the blockchain; use of a cryptocurrency wallet.

Examples: Initial coin offering, buying digital art NFT, Trading tokens on a cryptocurrency exchange

Indirect Investments (L7)

A digital asset investment forms in exchange-traded products and hedge funds.

Ex: Cryptocurrency ETF, Cryptocurrency coin trust, hedge fund investing in digital tokens, trading cryptocurrency stocks, buying bitcoin futures on a futures exchange

Centralized Exchange (L7)

A cryptocurrency exchange provide direct trading platforms with volume, liquidity, and price transparency.

• Depending on jurisdiction, may or may not be regulated; vulnerable to hacks.

Decentralized Exchanges (L7)

A cryptocurrency exchange operate in a similar way to bitcoin,

• No central coordination; difficult to regulate, harder to hack, and do illegal activities.

Digital Assets Risks And Return (L7)

Shows high return, high volatility, and low correlations with traditional asset classes.

Medium Exchange Digital Assets (L7)

Regulation of cryptocurrencies is evolving; uncertainty about legal protections. Multiple countries have placed restrictions on trading and owning crypto assets.

Asset-backed tokens (L7)

Can be issued on smart contract platforms that allow decentralized applications (dApps) to perform automated.

• Digital claims on physical assets, financial assets, or financial instruments.

• Collateralized by underlying asset

• Derive their value directly from underlying asset

• Increase liquidity by allowing frictional ownership of high-priced assets

• Reduces transaction & intermediation costs

Cryptocurrency Exchange-Traded Funds (L7)

• ETFs do not directly invest in cryptocurrencies

• Exposure is gained using cash & cryptocurrency derivatives

• No need for cryptocurrency wallets and passkeys.

Digital Investments through Hedge Funds (L7)

An indirect form of digital investing by having hedge funds act as miners.

Digital investments through Cryptocurrency Stocks (L7)

An indirect form of digital investment that is administered through block chain networks, and crypto payment providers.

Digital Investments through Cryptocurrency Coin Trusts (L7)

An indirect form of digital investment