Alternative Investments

7 Alternative Investments To Take Note Of

Whether times are tough or whether you’re looking to fortify your solid diversification strategy, alternative investments are almost always worth taking into account. As of the end of 2016, alternative investments contributed to 15 per cent of the $69.1 trillion in global assets under management, according to Carlson ‘s statistics from the Boston Consulting Group. Many are predicting the popularity trend to continue beyond 2020.

Technology is making investments easier and more accessible than they might have been before. Meanwhile, Millennials and Gen Z gravitate away from public equity investments. These changes brought about the growth of alternative assets. Are you a person who looks for new and innovative ways to approach investing. 

Including alternative investments as part of your portfolio could help with wealth management. 

Here are a few options to possibly help start you off.

Alternative Investments To Consider:

Renting out real estate

If it is a stable alternative investment to have your own home, renting out real estate could be the next best thing. It has most of the benefits including long-term appreciation and the mortgage paydown on the property. However, you could also get the benefit of rental income to cover the operational costs, and potentially even generate a profit.

While the cost of individual rental property is high, you can invest more efficiently through crowdfunding platforms for real estate. Platforms that allow you to invest a small sum of money in large apartment complexes are available. Even when financial assets are decreasing, apartments often perform well.

Private equity

There are far more private corporations than public companies and many of them take on capital from investors. Private equity is a broad term that describes the entire private capital market investment spectrum as a whole, and various private equity groups focus on multiple investment strategies. Normally, private equity firms raise money and take out capital from both non-institutional and institutional investors. The funds would then be used to place investments in promising private firms. After the company takes its management and performance fee, the capital is handed back to the investors upon an exit event such as an IPO or acquisition.

Alternative Investments

Venture capital

Venture capital is essentially a private equity subset which is specialized in start-up or early-stage investment. Venture capital falls further into the risky assets category; even so, it has the ability to yield outsized returns in nature. In the end, this really depends on the liquidity event ‘s effectiveness. Today, the venture capitalists who have invested in companies such as Facebook, Twitter and Google are taking home extremely valuable returns on their investment.

Artwork

Investing in artwork has been considered the preserve of the wealthy, much like investing in hedge funds. And this could be the best single argument for considering investing in it. The Artprice 100 index – a benchmark focusing on “blue-chip” artists – has an average annual return over the past 18 years of 8.9 per cent.

For new collectors, the common misconception is that they might not be able to enter the art market without breaking the bank. Fortunately, average Joes can still stake their claim to art without losing an arm and a leg. Novice investors can purchase art with limited resources through art funds, and without having to worry about concerns that accompany owning fine and pricey pieces, such as insurance and maintenance.

Commodities

You might have come across someone who has opened an investment account with an online platform in order to trade commodities.

Commodities like gold and silver do seem to have a reputation for being a tricky asset class, leaving numerous people fearing it would be a complicated move to invest in this option. However, many of these fears largely remain unjustified.

In fact, investing in stocks has proven to be higher in risk than investing in commodities on the basis of established risk levels. In some economies, investment in commodities offers protection against inflation devastation and instead helps investor portfolios to retain and even increase value during these times. Commodity market developments are creating opportunities for investors to take advantage of commodities as an alternative investment vehicle with the associated benefits of portfolio diversification and the potential for higher returns. 

Direct investments in companies

Alternatively, investors might decide to invest directly in opportunities such as start-ups and private firms, rather than investing in a private equity fund. Sometimes investing seed capital directly in start-ups is called angel investing. This is indeed a high-risk strategy and a high return for investors, as many start-ups end up failing. A private company will seek investors depending on a certain valuation through a private placement. Retail investors may participate in some offerings based on the type of exemption that the company relies on for registration. Through most of their life cycles, companies seek investment capital, therefore more established companies could also be targeted for investment.

Hedge funds

Hedge funds are consolidated funds which can be invested in various asset types and strategies. The individuals who focus on hedge funds invest through various financial instruments and styles. Several well-known hedge fund strategies include arbitrage, short equity, macro-trends, and distressed assets. Hedge funds differ quite significantly from venture capital and private equity since they have higher frequencies of redemption and also liquidity. In fact, the phenomenon helps investors get more profit at the end of the day.


Hampton Wealth specialises in sourcing high quality, listed bonds and funds with a focus on providing returns in excess of normal off the shelf investment options.

Find out more at HamptonWealth.Com

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