While this category can include credit default swaps, as well as other varieties of swaps and swaptions; futures, forwards, and options; along with commodities and fairly esoteric investments, such as guitars, watches, and artwork; it also is where we house [pardon the pun] real estate and private equity.
In the case of real estate and private equity, while we may not know all the answers, many of the rules are fairly well agreed upon. The GIPS(R) standards (Global Investment Performance Standards) after all includes rules specifically for these asset classes.
But there is a broad, make that very broad, collection of instruments for which the rules are less clear. And when we speak about rules, we must consider:
- Valuing the assets
- Deriving returns on the assets
- Measuring risk of the assets
- Determining how to handle them as part of our attribution
- and no doubt a lot more.