Glossary of Terms

Investment returns independent of market cycles or the general ups and downs of investment markets. The aim is to produce positive returns in all market conditions, returns that do not correlate with the standard share, property or fixed-interest market benchmarks.

Alternative Investment Managers Association. Australian industry association for hedge fund managers.

A measure of a managed fund's performance relative to its benchmark. A positive alpha value indicates outperformance, or higher returns than the market index. If the market index has returned 3 per cent for a given period, and the fund has returned 5 per cent, the fund would be said to have an alpha of 2 per cent for the period.

Investment assets whose value moves independently of prices in the conventional share, property and fixed-interest markets. Hedge funds are one alternative asset class, with infrastructure and private equity also in this category. Alternative assets lend themselves to the pursuit of absolute returns.

A strategy that takes advantage of a price differential between different markets for the same security, or, between derivatives or convertible securities and their underlying securities. The attraction is the prospect of low-risk profits from buying in the cheaper market and selling in the higher market.