Alternative Investment Benchmarks

Real Estate:

1. Direct: National Council of Real Estate Investment Fiduciaries (NCREIF), annually, so volatility is downward biased!

2. Indirect: National Association of Real Estate Investment Trusts (NAREIT) – live as it reflects those in current trades, cap-weighted of all REIT

Private Equity:

Cambridge and Associates and Thomson Venture Economics

Use IPO, merger and refinancing to construct.

Reprcing is infrequent.

Commodities:

DJ-AIGCI, S&PCI

Index has to be investable – meaning holding the underlying is equivalent to holding the index

Cannot use cap-weight because futures are zero-sum game (so that you can arbitrarily creates many contracts?)

So use world productive or perceived relative importance

Hedge Funds:

Biases:

1. Self-reporting: managers tends to report well-performed ones
2. Backfilling: new funds only included when performance meeting certain criteria
3. Popularity: for cap-weighted, good funds draws more investment. As a result, increase in index is not due to gain but new investments
4. For equal weighted, rebalancing is not frequent enough so not investable
5. Survivorship: poor funds drop out

Managed Futures:

Mechanical trend following strategy

Peer-group managed futures funds (dollar weighted or equal weighted)

Distressed Securities:

Sub-index from Hedge Funds