Is Investing in Alternative Investments a right choice?


Times are changing, instead of investing in traditional investments like banking and properties, alternative investment have become the new norm. With the universe of alternative investments burgeoning, due exposure has to be shed on it, to help investors in general. Should they invest in private and upcoming companies? What about lower middle market buyout funds, should they invest in it or not? Investing in a private seed fund is risky, but is it worth the risk? And many more. Such questions can be answered only when a person knows alternative investing. Here are some points that will provide a glimpse into alternative investments. 

Present state of affairs in Alternative investment

Despite the availability of a slew of attractive propositions, investors tend to be wary when it comes to alternative investments. Irrespective of the kind of investments, only those who make the right move and research intensively will gain more profit compared to those who blindly invest in mainstream investments. 

 

Over the years, alternative investment market has risen with an incredible growth. Alternative Investment market is worth around $180B today and its perched to expand at an astonishing rate too, thereby attracting investors from all walks of life to capitalise on the opportunities that alternative investments provide. With right opportunities and ample research, a unique portfolio that supports an investor’s lifestyle and finance can be created to open up new ventures. 

Common Alternative investments available

Some of the common alternative investments that’s available in the market

  • Private Equity- Private equity funds are basically Private companies that take on investor capital. It encompasses the entire gamut of private capital markets, and various private equity funds that specialises in multiple investment strategies. Funds that are invested on these firms are exited through IPO or acquisitions. Under private equity start-ups and venture capitals are also included. 
  • Direct investment in start-ups and private companies- Instead of investing on private funds, investors can directly invest into start-ups. This mode of investment is commonly referred to as angel investing. It involves both high-risk and high return strategy as none can predict the future performance of a strat-up.
  • Venture capital- This much similar to private equity, however under venture capital you invest in early-stage to growth-stage companies. Though it’s a risky asset class, it can produce outsized return on a successful liquidity event. 
  • Real assets- The assets that are physical and tangiable and posses intrinsic value. For ex- real estate, oil, precious metal commodities, agricultural land etc. 
  • Hedge funds- there are investment funds meant for a variety of strategies and asset types and are pooled together. Hedge fund managers raise funds to invest on different financial instruments and styles. These are usually invested on public equites instead of private funds and have greater liquidity. 

Is there a happy ending?

According to research driven data from various platforms, Alternative investments is projected to grow to 18.1 trillion US dollars. However, when it comes to alternative investments the risks are much complex when compared to traditional investments. Higher fees and higher volatility along with illiquid investments increase their complexity in prices and make it difficult to exit from them once when you invest. Yet, these disadvantages can be overcome through proper research and liquid alternative investments that include exchange-traded funds and mutual funds, where risks can be mitigated easily. 

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