Stocks, bonds, cash and cash equivalents are all considered PUBLIC investments. We talked about that last time.
Today we’re going to discuss PRIVATE Investments also referred to as:
Alternatives.
Investors will look to private or alternative investments to get better returns than in the stock or bond market.
Most financial advisers will tell their clients to put 5-15% of their investment capital into alternative assets to catch the potential upside.
The standard benchmark in investing is the S&P 500. Everyone compares themselves to that.
So that means… as a fund manager – YOU MUST OUTPERFORM THE S&P 500. Otherwise, investors won’t want to put their money with you. They will move it somewhere else!
There are several different types of Alternative Investments.
I have a previous blogs explaining these in more detail, but here’s a summary of the most common types of Alternative Asset Funds:
Real Estate Fund
Quick recap: These funds ‘Buy & Flip’ or ‘Buy & Hold’ residential, multifamily, and commercial properties.
Remember when house flipping was a trend? Yeah kinda like that. Except deals can vary size, sometimes becoming multi-billion dollar deals.
Debt Fund
Quick recap: Issue loans to entities in need of capital – most common are bridge loans or hard money loans to Real Estate Shops or Entrepreneurs.
Quick recap: Forex stands for “Foreign Exchange” and is essentially trading one country’s currency against another.
Hedge Fund
Quick recap: These are high risk, leveraged trading strategies. Most commonly with public equities or indexes.
Quick recap: Invest money into new & emerging companies or technology. This includes Seed money or Series A – D rounds. Big risk, but can have BIG payouts.
Private Equity
Quick recap: PE, simply put, is buying and trading developed companies that are not publicly traded. Often executed by infusing large amounts of capital to grow the business.
Why Alternative Investments?
JP Morgan stated,
“Alternatives can open the door to enhanced investment returns and portfolio diversification. You also have access to investment managers who may influence change and drive performance in private companies, typically not possible in public companies.”
Alternative investments usually come with higher risk. But everyone knows… with higher risk comes the possibility of a HUGE payout.
Plus – most investors are actively looking for something that will diversify and broaden their investments.
While traditionally only for institutional investors and accredited investors, alternative investments have become feasible to retail investors via alt funds, ETFs and mutual funds that build portfolios of alternative assets.
And this is where you come in!
With a solid fund thesis and the promise of a high return, you can easily find enough investors to get your alternative fund started.
As long as you’re outperforming the S&P 500 and giving investors a reason to keep their money with you, you’re set!
Best of luck,
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.