Derivatives
A derivative is typically a right or an obligation to buy or sell another type of asset (such as shares or bonds) at a specific price and at a specific date and time in the future. The specific price may turn out to be higher or lower than the market price at that date.
Private equity
Private equity is a share in a company that is privately held, not publicly listed on a stock exchange.
Hedge Funds
Hedge funds were originally created to provide a low-risk way of achieving consistent returns in any market conditions. Most hedge funds are private investment vehicles and are not publicly traded. They are set up as limited partnerships, in which the partners invest a significant amount of their own assets.
Unlike most traditional funds, hedge funds can use a variety of tools, such as derivatives, in order to implement their often complex investment strategies.
Commodities
Commodities are the raw materials used to create the goods we buy and the food we eat. As an asset class, commodities are divided into the following sub-sectors:
• Energy, such as oil and gas
• Industrial (or base) metals, such as copper and aluminium
• Precious metals, such as gold and silver
• Agricultural commodities, such as grains (wheat, corn etc.) and soft commodities (cotton, coffee etc.)
• Livestock, such as live cattle.
The key difference between commodities and financial asset classes (such as shares and bonds) is that commodities are tangible, physical, useful assets. That is an important distinction, because it affects the way commodity prices react to changing economic conditions.