Alternative investments aim to generate alpha returns by assuming unsystematic risks that are specific to the investment, such as illiquidity or unique sector risks, which are not correlated with market movements. These excess returns over traditional investments are the primary goal of alternative investments.

Practice question from NISM Series XIX A- Alternative Investments Funds (AIF) Distributors Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

Alpha returns for unsystematic risk

Correct answer
B

Beta returns for large investors and alpha for small investors
C

Beta returns in favorable market conditions
D

Beta as minimum returns and alpha as target returns

Why this is the answer

Alpha is the excess return earned by taking unsystematic, non-market risks in alternative investments.

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NISM Series XIX A- Alternative Investmen…