Alternative Asset Management Solutions for Investors

For investors looking to diversify their portfolios, alternative asset management solutions offer a promising avenue for growth. These solutions can provide a hedge against traditional market volatility.

Investors can explore various options, such as private equity, real estate, and commodities, which have historically offered higher returns than traditional assets. According to data, private equity investments have generated an average annual return of 10% over the past decade.

A key consideration for investors is the level of risk involved with alternative assets. Real estate, for example, can be affected by local market conditions and economic downturns.

Broaden your view: Debt to Total Assets Ratio Definition

Alternative asset management is a way to diversify your investments and reduce risk by allocating a portion of your portfolio to non-traditional assets.

Alternative investments can be incorporated into various investment strategies and risk profiles, giving you many options to build a portfolio tailored to your needs.

They provide an opportunity to guard against the volatility of equities and hedge against inflation, and can potentially achieve better returns.

A fresh viewpoint: Two Sigma Investments Salary

Hedge funds can be a great way to diversify out of equities without sacrificing returns, and private equity investments aim to attain a significantly higher rate of return than publicly traded equities.

Real assets, such as infrastructure and real estate, can provide similar benefits alongside a measure of protection against inflation.

Alternative assets are often held by institutional investors or accredited, high-net-worth individuals due to their complex nature and degree of risk.

Many alternative investments have high minimum investments and fee structures, especially when compared to mutual funds and ETFs.

These investments also have less opportunity to publish verifiable performance data and advertise to potential investors, making it difficult to research and evaluate them.

Investors may have difficulty valuing alternative investments, such as rare collectibles or coins, due to their rarity and limited market data.

You might like: Fisher Investments Funds

Alternative assets offer a range of options to diversify a portfolio and achieve better returns. Real estate investments, for instance, provide a tangible and popular form of alternative investment, including direct ownership of properties, REITs, and land acquisitions.

Real estate investments offer the potential for long-term appreciation and income through rental payments. They can also serve as a hedge against inflation, making them an attractive option for investors. However, like all alternative investments, real estate comes with risks, such as market fluctuations and interest rate changes.

Some other types of alternative assets include collectibles and tangible assets, like art, antiques, and rare coins, which have intrinsic value and can appreciate over time. Private equity and venture capital investments involve buying shares in private companies or startups, offering the potential for high returns but also higher risk and illiquidity.

Here are some examples of alternative assets:

These are just a few examples of the many types of alternative assets available. Each has its own unique characteristics, risks, and potential returns, making it essential to research and understand each option before investing.

Real estate is one of the most popular forms of alternative investments, offering tangible assets and potential for steady income through rental payments. It includes direct ownership of properties, real estate investment trusts (REITs), and land acquisitions.

See what others are reading: Boardwalk Real Estate Investment Trust

Private equity involves investing in private companies not listed on public stock exchanges, typically pursued by accredited investors and institutional investors. This type of investment requires substantial capital and extensive due diligence.

Hedge funds are pooled investment funds that employ various strategies to earn active returns for their investors, often investing in a wide range of assets, including derivatives, currencies, and commodities.

Commodities are raw materials such as gold, silver, oil, or agricultural products, offering tangible goods with perpetual demand due to their underlying characteristics.

Venture capital is a subset of private equity that focuses on funding startups and early-stage companies, offering high-risk investments with potential for high returns if the company succeeds.

Farmland is a blend of real estate and commodities, offering tangible land and potential for ongoing cash proceeds through operations and sales of commodities.

Peer-to-peer lending involves making loans to individuals or businesses through online platforms, offering a potential for higher returns but also higher risk.

Private markets offer diversification away from listed markets and the potential for compelling risk-adjusted returns, often providing an illiquidity premium and greater protection from market shocks.

Consider reading: Markets in Crypto-Assets

Real estate investments include direct ownership, REITs, and real estate crowdfunding platforms, offering a hedge against inflation and potential for steady income.

Here are some of the most popular types of alternative investments:

Each of these types of alternative investments offers unique benefits and risks, and investors should carefully consider their own risk tolerance and financial goals before investing.

Art and collectibles can be a unique and exciting way to diversify your investment portfolio. Some investments may double as a hobby, with art, sports memorabilia, entertainment memorabilia, high-end watches, or other collectibles acting as alternative investments.

These items may have historical worth or develop worth over time as related parties become more historic. For example, art and collectibles can appreciate in value as the artist or associated celebrity becomes more famous.

Investing in art and collectibles involves buying and owning physical items, such as paintings, sculptures, rare coins, or other unique collectibles. The value of these items can fluctuate significantly based on demand, trends, and the economy.

See what others are reading: Art as an Asset Class

Determining the value of collectibles can be subjective and may require expert appraisal. To get started, investors can work with reputable art dealers or auction houses, or explore online marketplaces.

Here are some ways to invest in art and collectibles:

Keep in mind that investing in art and collectibles can be illiquid and may be difficult to sell at their true market value.

Cryptocurrencies are a type of alternative asset that has gained significant attention in recent years. They're digital currencies that use blockchain technology to operate independently of central banks, offering a new way to store and transfer value.

Cryptocurrencies are known for their volatility, with prices often experiencing sharp fluctuations within short periods. This means that investors can see substantial gains, but also face substantial losses.

Investing in cryptocurrencies requires a high tolerance for risk and a deep understanding of the technology and market dynamics that drive their value. It's essential to be comfortable with the potential for losses before investing in cryptocurrencies.

On a similar theme: Activist Investor Starboard Value

Here are some key considerations for investing in cryptocurrencies:

If you're considering investing in cryptocurrencies, it's crucial to understand the risks and potential rewards. It's also essential to consult with a financial advisor to determine whether cryptocurrencies align with your financial goals and risk tolerance.

Regulation and Compliance is a crucial aspect of alternative asset management. Alternative investments are often subject to a less clear legal structure than conventional investments.

Accredited investors, who have a net worth exceeding $1 million or an annual income of at least $200,000, may invest in alternative offerings. This can include financial professionals with FINRA Series 7, 65, or 82 licenses.

The lack of regulations in alternative investments makes them prone to investment scams and fraud. To mitigate this risk, investors must conduct extensive due diligence before investing.

Here are some key regulatory facts to keep in mind:

The Dodd-Frank Wall Street Reform and Consumer Protection Act provides some oversight, but alternative investments are not as heavily regulated as mutual funds and ETFs.

Alternative investment vehicles are regulated by the SEC, but their securities don't have to be registered, making them only available to institutions or wealthy accredited investors.

The Dodd-Frank Wall Street Reform and Consumer Protection Act does apply to alternative investments, and their practices are subject to examination by the SEC.

Accredited investors, who have a net worth exceeding $1 million or an annual income of at least $200,000, may invest in alternative offerings.

To qualify as an accredited investor, one must meet certain income or net worth requirements, or hold a specific FINRA license.

Here are the specific requirements to be an accredited investor:

It's worth noting that only accredited investors may invest in alternative offerings, making it essential for investors to conduct extensive due diligence when considering alternative investments.

The tax implications of alternative investments can be complex and nuanced. The IRS has different rules for alternative investments compared to traditional stocks and bonds.

Consider reading: Venture Capital Investments

Some alternative investments, like collectibles and art, may not offer the same tax deductions as traditional investments. They are explicitly defined by the IRS as a collectible, and net capital gains are subject to a maximum 28% tax rate.

The alternative investment industry is expected to grow to $24.5 trillion in assets under management by 2028. This growth highlights the importance of understanding tax implications.

Cryptocurrency and other digital assets have evolving tax rules. Digital assets may incur taxable transactions when sold for fiat, exchanged for goods or services, or exchanged for another digital asset.

Fluctuations in the value of digital assets often result in capital gains or losses, unlike fluctuations in the value of the U.S. dollar. This means investors need to be aware of these changes.

Some alternative investments, like real estate and certain types of energy investments, may offer tax-deferred or tax-free investing options.

Explore further: Starboard Value

Automate Compliance and Planning is a game-changer for businesses. The KPMG Asset Management Platform (AMP) is a leading-edge technology that can help you streamline tax compliance and planning.

This platform is informed by extensive tax knowledge of asset management entities such as passthroughs, Regulated Investments Companies (RICs), and Real Estate Investment Trusts (REITs).

With AMP, you can save time, improve accuracy, and discover new tax value-adds for your organization.

A unique perspective: Are Asset Management Fees Tax Deductible