Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

Identify the characteristic that defines opportunistic real estate investments.

1. Focus on established properties

2. Specialize in short-term investments

3. Involve development of properties

4. Invest in fully leased properties

The correct answer is: Involve development of properties

Opportunistic real estate investments are characterized by their involvement in the development of properties. This type of investment typically entails higher risk and the potential for higher returns, as it includes activities such as purchasing land for new development, repositioning underperforming assets, or making significant renovations to add value to an existing property. Investors engaging in opportunistic strategies are often willing to take on projects that require substantial capital investment and time to fully realize their value. In contrast, focusing solely on established properties or investing in fully leased properties would lean more towards core or core-plus strategies, which prioritize stability and steady income over significant development efforts. Additionally, specializing in short-term investments does not capture the essence of opportunistic investments, as these often involve longer time frames to allow for development, lease-up, and stabilization of properties before realizing a return.