Читать книгу Alternative Investments - Hossein Kazemi - Страница 22

Three other issues help form the complex differentiation between alternative and traditional investments: information asymmetries, incomplete markets, and innovation.

Information asymmetries refer to the extent to which market participants possess different data and knowledge. In traditional investments, most securities are regulated and are required to disclose substantial information to the public. Many alternative investments are private placements, and therefore the potential for large information asymmetries is greater. These information asymmetries raise substantial issues for financial analysis and portfolio management.

Incomplete markets refer to markets with insufficient distinct investment opportunities. The lack of distinct investment opportunities prevents market participants from implementing an investment strategy that satisfies their exact preferences, such as their preferences regarding risk exposures. In an ideal world, securities could be costlessly created to meet every investor need. For example, an investor may desire an insurance contract that contains a specific clause regarding payouts, but regulations may make such clauses illegal. Or perhaps a contract with regard to a potential risk may be subject to unacceptable moral hazard. Moral hazard is that risk that the behavior of one or more parties will change after entering into a contract. As a result of this inability to contract efficiently, the investor might be unable to diversify perfectly. Trading structures in some alternative investments, such as large minimum investment sizes, can be viewed as exacerbating the problem of incomplete markets and the investment challenges that accompany them.

Finally, substantial degrees of innovation permeate the world of alternative investments, from the nascent enterprises of venture capital to the pioneering structures implemented in financial derivatives. The new and rapidly changing nature of alternative investments raises issues regarding methods of financial analysis and portfolio management that distinguish the study of alternative investments from the study of traditional investments.