When talking about Alternative investment capital, it refers mainly to all those investments in assets that are difficult to quantify and to keep in the portfolio due to their illiquidity and difficult commercial valuation.
Examples of them are investments in coins, stamps, wine bottles, art collections or other collections, among other exotic investments. As a result of the recent technological innovations that are emerging in the financial world, a large number of very different investment alternatives to traditional ones such as stocks, mutual funds or bonds are appearing lately.
There are types of unconventional investments in the market, some with high risk and high profitability – others with lower risk but with attractive returns. Let’s see some examples:
1. An alternative investment in hedge funds (Offshore investment):
It is a collective investment vehicle that is organized privately, managed by professional societies (investment banks or fund managers) that charge commissions on results obtained. They are not available to the general public since it requires minimum investment amounts very high.
These hedge funds have a greater degree of freedom than traditional funds, offering the freedom to invest in a wide variety of assets, in virtually any type of market.
2. An alternative investment in managed futures:
Managed futures are an alternative asset class that has achieved very good results in the ups and downs of the market, showing a low correlation with traditional asset classes, such as stocks, bonds, cash, and real estate. These are investment funds that trade with futures and with term contracts of financial assets such as currencies, interest rates or also with intangible assets.
3. An alternative investment in real assets:
A real asset is a non-financial asset that represents a real consumer right. It can be tangible or intangible. The opposite is traditional financial assets (for example, stocks or bonds).
Its use as an alternative investment is frequent due to its de-correlation (or negative correlation) with the evolution of the prices of traditional financial assets.
In addition to providing the investment portfolio with a diversification effect, that is, in short, a lower risk. They are used by hedge funds or investment funds to invest in this asset class.
These investments reduce the risk significantly without just changing the expected return on the portfolio. Alternative investments are often much more illiquid than investments in traditional financial assets.
Due to the little uncertainty about the profitability of these assets and their illiquidity, investors demand greater returns as a way to compensate for these risk factors.
If you want to know more about investment, it is advisable to consult the best Alternative investment management firm.