Alternative Investments

by admin

There is a vast universe of alternative investments, including the following sectors:

Real estate: Investors can acquire real estate by directly buying commercial or residential properties. Alternatively, they can purchase shares in real estate investment trusts (REITs). REITs act like mutual funds wherein a group of investors pool their money together to purchase properties. They trade like stocks on the same exchange.

Hedge funds: Hedge funds may invest in a spectrum of assets designed to deliver beyond market returns, called “alpha.” However, performance is not guaranteed, and hedge funds can see incredible shifts in returns, sometimes underperforming the market by a significant margin.

Typically only available to accredited investors, these vehicles often require high initial investments of $1 million or more. They also tend to impose net worth requirements. Hedge fund investments may tie up an investor’s money for substantial time periods.

Private equity fund: Private equity funds are pooled investment vehicles similar to mutual and hedge funds. A private equity firm, known as the “adviser,” pools money invested in the fund by multiple investors and then makes investments on behalf of the fund. Private equity funds often take a controlling interest in an operating company and engage in active management of the company in an effort to bolster its value. Other private equity fund strategies include targeting fast-growing companies or startups. Like a hedge fund, private equity firms tend to focus on long-term investment opportunities of 10 years or more.

Commodities: Commodities refer to tangible resources such as gold, silver, and crude oil, as well as agricultural products.

There are multiple ways of accessing commodity investments. A commodity pool or “managed futures fund” is a private investment vehicle combining contributions from multiple investors to trade in the futures and commodities markets. A benefit of commodity pools is that an individual investor’s risk is limited to her financial contribution to the fund. Some specialized ETFs are also designed to focus on commodities.

You may also like

Leave a Comment