Alternative Asset Investments
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For the majority of individuals who are less familiar with the investment world, examples of alternative assets would likely include art and antiques, precious metals, fine wines, rare stamps and coins other similar collectibles. In the world of asset management, there are also more traditional alternative assets including hedge funds, venture capital-related projects and infrastructure. In either case, alternative assets tend to be less liquid than traditional investments. Thus, investors who favor alternative assets may have to consider a longer investment term.
Alternative assets can bring substantial benefits to investment portfolios through the diversification benefits that they offer and exposure away from traditional fixed-income and equity assets. Thankfully, alternative assets are no longer only for the wealthiest 1% and through a series of funds including mutual and exchange traded funds (ETFs) as well as the exchange traded notes, even the most novice investors will be able to benefit from. In fact by understanding the various forms of alternative assets and how they can be effectively used to enhance portfolio diversification, even investors who have little experience in trading in general can benefit from the potential returns and lower risks of this diversification.
As well as the single-asset financial instruments, the term "alternative assets" can also be a reference to pooled investment vehicles (multiple investors' money is pooled by one manager) constructed to possess a different risk/reward matrix from traditional debt or equity investments. Pooled alternative vehicles can come in the same forms as the more traditional investment fund options - such as FSA (or SEC in the case of American investment funds) registered mutual funds or separately managed accounts (SMAs). They can also be unregistered vehicles like hedge funds, venture capital or private equity funds. These funds, in the majority of cases, use a combination of securities, some standard and some alternative to provide a good return with an appropriate level of diversification.
In the past, alternative asset investments have been almost exclusively for high net worth investors, these assets' illiquid secondary markets and high minimum investment sizes serve as a deterrent to participation by a broader retail market. However, with the constant and rapid development of global financial markets in recent years, continuing to provide an ever-greater number and depth of products through which more investors can add alternative assets to their portfolios - the benefits are now available to a much wider and diverse range of investors. Mutual funds, exchange-traded funds (ETFs) and exchange-traded notes (ETNs) are all investment options that offer various exposures to directional alternative assets like commodities, real estate and foreign currencies, as well as certain hedge strategies like buy-write.
Alternative assets can bring substantial benefits to investment portfolios through the diversification benefits that they offer and exposure away from traditional fixed-income and equity assets. Thankfully, alternative assets are no longer only for the wealthiest 1% and through a series of funds including mutual and exchange traded funds (ETFs) as well as the exchange traded notes, even the most novice investors will be able to benefit from. In fact by understanding the various forms of alternative assets and how they can be effectively used to enhance portfolio diversification, even investors who have little experience in trading in general can benefit from the potential returns and lower risks of this diversification.
As well as the single-asset financial instruments, the term "alternative assets" can also be a reference to pooled investment vehicles (multiple investors' money is pooled by one manager) constructed to possess a different risk/reward matrix from traditional debt or equity investments. Pooled alternative vehicles can come in the same forms as the more traditional investment fund options - such as FSA (or SEC in the case of American investment funds) registered mutual funds or separately managed accounts (SMAs). They can also be unregistered vehicles like hedge funds, venture capital or private equity funds. These funds, in the majority of cases, use a combination of securities, some standard and some alternative to provide a good return with an appropriate level of diversification.
In the past, alternative asset investments have been almost exclusively for high net worth investors, these assets' illiquid secondary markets and high minimum investment sizes serve as a deterrent to participation by a broader retail market. However, with the constant and rapid development of global financial markets in recent years, continuing to provide an ever-greater number and depth of products through which more investors can add alternative assets to their portfolios - the benefits are now available to a much wider and diverse range of investors. Mutual funds, exchange-traded funds (ETFs) and exchange-traded notes (ETNs) are all investment options that offer various exposures to directional alternative assets like commodities, real estate and foreign currencies, as well as certain hedge strategies like buy-write.
