Chartered Alternative Investment Analyst (CAIA) Practice Exam 2026 – All-in-One Guide to Master Your Certification!

Liquid alternatives refer to investment strategies that aim to provide the benefits of traditional hedge funds while being more accessible and liquid than their private market counterparts. Hedge funds are included in this category because they typically invest in a wide range of assets and employ diverse strategies that can include long/short equity, macroeconomic trends, and arbitrage, among others.

These vehicles are designed to be available for trading on a relatively frequent basis, often allowing investors to access them through mutual funds or exchange-traded funds (ETFs) that mimic hedge fund strategies without the higher barriers to entry that traditionally exist in hedge funds, such as high minimum investments and lock-up periods. As a result, hedge funds are specifically tailored to provide liquidity while still aiming for the potential benefits of alternative investments.

In contrast, commodities, private equity, and real estate generally do not possess the same liquidity profile. Commodities can be traded, but they usually involve different dynamics and are not necessarily classified as liquid alternatives in terms of structured investment strategies. Private equity requires longer-term commitments with little to no liquidity for many years, making it less appealing for investors seeking liquid alternatives. Real estate investments tend to have significant barriers to entry and illiquidity associated with property transactions, further differentiating them from hedge