Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

Which of the following is NOT considered a major type of alternative investment?

1. Real Assets

2. Hedge Funds

3. Structured Products

4. Mutual Funds

The correct answer is: Mutual Funds

The correct answer is that mutual funds are not considered a major type of alternative investment. In the investment world, alternative investments typically refer to asset classes and strategies that fall outside of the traditional investments like stocks and bonds. Major types of alternative investments include real assets, such as real estate and commodities, hedge funds that employ various strategies for generating returns, and structured products, which are pre-packaged investments that derive their value from underlying assets. Mutual funds, on the other hand, primarily consist of investments in traditional securities—like stocks and bonds—pooled together from many investors. They are managed by professional portfolio managers and are designed to provide investors with a diversified exposure to the market. Therefore, while mutual funds are a popular investment vehicle, they do not fit within the category of alternative investments. This distinction helps investors understand the nature and characteristics of their portfolios, especially when considering risk and return profiles.