With a diversified portfolio, alternative investments can complement more conservative investments and produce higher returns. This week’s news focuses on pockets of opportunities, such as in multi-asset absolute-return funds, smaller hedge funds and real estate.
‘Picky’ Investors Seek New Ways To Buy Alternatives (FT Adviser, February 6)
As investors look for substitutes to traditional equities and bonds, alternative investments are gaining in popularity. The recent growth “has been driven by larger investors, with advisers thus far tending to concentrate on multi-asset absolute return funds.” As alternatives gain traction, investors will start to “move away from the big multi-asset funds and get more picky.” One possible problem investors could face is regulatory issues since some of the more unusual asset classes are still in the early development stages.
Change Management for Fund Managers (All About Alpha, February 8)
The author of this article looks at key issues for investors from Ernst & Young’s 2016 Global Hedge Fund and Investor survey. Alternatives continue to gain in popularity with “almost half of investors…continuing to actively seek out non-traditional products.” Larger managers are benefiting most from greater fee income. However, small managers are continuing to find unique opportunities for investors to compete in the market.
4 Alternative Investment Ideas for Diversifying Your Portfolio (NuWire Investor, January 31)
Although alternative investments have higher risk than traditional investments, in a diversified portfolio they can complement more conservative choices and provide higher returns. Private equity funds offer opportunities to invest in private firms that need funding. But those managers often have high fees and minimal input from investors. Crowdfunding offers direct investment with startups, however, with less oversight the due diligence falls on the investor. Another option is the derivatives market or learning how to trade binary options. This can provide “a massive leverage to profit on different kinds of securities without actually buying or owning the security.”
Many Smaller Hedge Funds Are Raising Assets from Wealthy Investors and Single-Family Offices (Forbes, February 7)
The perception that hedge funds’ performance is trending downward is not the case for certain pockets of the industry. Smaller funds are putting up solid numbers and are bringing in new assets particularly from single-family offices. “Quite possibly because of their size, they can be more nimble and able positive returns because of their relatively smaller base.” As family offices look for alternative investments, smaller hedge funds are looking to private placement life insurance (PPLI) and are attracting new investors.
Are Real Estate or Stocks a Good Investment for 2017 Under Donald Trump? (Income Investors, January 31)
Deciding how to diversify a portfolio takes research and understanding a person’s risk tolerance and life stage. The author of this article looks at whether real estate or the stock market holds more potential for investors under President Trump. With interest rates increasing and policy looking to burden first-time homebuyers, demand may start going to down for the overall real estate market. The stock market, however, stands to benefit from policy changes and deregulation in certain industries. With President Trump looking to bring money back to the U.S., it is possible to see continued growth in the market and a good place for investors to focus.
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