More and more investors are opting for alternative investments in order to achieve higher returns, generate income, diversify their portfolios and achieve their investment goals.
If you have built up wealth by saving, in a company or through an inheritance, your money can ‘work for you’. In other words, you can get income from the return on your capital. Leaving it in a savings account, however, will not yield enough; you will have to invest your assets. There are various options for investments.
The most well-known are investing in stocks and bonds, either directly or through mutual funds. Less common, but no less interesting, are the alternative investments, which have their own characteristics and advantages and disadvantages.
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Broadly speaking, there are two types of alternative investments. First, investments in private markets (such as private equity, private credit, infrastructure and real estate), which are more complex and less traded than listed securities. And hedge funds, which are often listed, but use less traditional techniques.
Alternative investments are now an important tool for both advisors and investors. But the enormous growth of the private markets makes this type of investment more complex.
More and more investors are opting for alternative investments to achieve higher returns, generate income, diversify the portfolio and achieve their investment goals. But as the supply grows, these investments also become more complex, making it more difficult for investors to make the right choices.
What Types of Alternative Investments Are There?
- Liquid Alternative Investments – Investments aimed at diversification and protection against market declines, through predominantly liquid instruments such as investment funds, UCITS, offshore funds 6 and ETFs .
- Illiquid Alternative Investments – These are investments that are traded less frequently and/or have smaller volumes. This makes the yield more difficult to map. Because these investments are more difficult to sell and value, many investors demand a risk premium. While some investors want to avoid illiquid investments at all costs, others choose to deliberately invest more in them in order to take advantage of this risk premium.
Are Alternative Investments Riskier?
That is often thought of and it is the case for some alternative investments. Take private equity where you invest in young or start-up companies. If it goes well, the return can increase considerably. If it goes wrong, you just lose everything. But other alternative investments, such as shipping, real estate or real estate financing, have – if you approach them correctly – a lower risk profile. Possibly investors have a lot of security.
Is an Alternative Investment Suitable For Everyone?
What we see is that many people opt for alternative investments to spread their investments more. If you have not linked part of your assets to broader market developments, this can be beneficial when those markets are under performing. With regard to our product: investing in shipping or maritime assets fits in with a strategy aimed at capital preservation and a stable return.