4 Alternative Investment Products and How to Create Portfolio Diversify

4 Alternative Investment Products and How to Create Portfolio Diversify 14

OCTOBER 1, 2018 – COLORADO SPRINGS, COLORADO – “With alternative investments becoming more popular with institutional investors, such as endowment and pension funds, it’s time that individual investors also turn their eyes towards this class of assets to benefit from their long-term advantages,” says Clem Borkowski, Managing Partner at ASI Capital LLC of Colorado Springs, CO.  Alternative investments refer to a broad category of assets outside the familiar investment options (stocks, bills and bonds, exchange-traded funds etc.) and cover everything from real estate, private equity and venture capital to annuities, hedge funds and commodities. “Alternative investments are an excellent way to reduce risk by diversifying your portfolio,” advises Borkowski. Here are four common options for investors interested in alternative investments:

Private equity: Did you know that the number of private companies exceeds public companies by far and that these companies are open to investor capital? Private equity is a broad category that covers the investment in private capital markets and various private equity firms which concentrate on multiple investment strategies.

These firms raise capital and receive funds from institutional as well as individual investors, and these funds are then directed towards promising private companies. This capital will be returned to investors when an exit event occurs, e.g. acquisition or IPO, and the management will deduct a performance and management fee. This class includes investment in start-ups, venture capitalism and financing of private companies at all stages of the growth cycle.

Real estate: While recent memory of property busts can make investors wary of including real estate in their portfolio, you can still invest through real estate investment trusts (REITs) which offer unmatched risk management/mitigation options. These trusts have helped investors to receive returns amid volatile markets. Real estate does not shift according to movement of stocks and it has almost zero correlation with short-term bonds.

“Real estate is categorized by investment experts as a low-correlating asset, and not a no-correlating asset, but diversifying in real estate is still advised for many investors. “It’s an investment that require large capital to start, however that obstacle can be easily overcome by joining a cooperative, whereas you can still benefit from the security of the asset,” says Clem Borkowski.

Commodities: Even though commodities are not common presently, over time, commodity investment can help to offset the volatility of stocks and bonds. The value of commodities increases with inflation and negatively correlates to stocks and bonds. Therefore, when bonds have consecutive negative returns, commodities are more likely to post positive returns. In addition, commodities perform best in periods when your portfolio needs the most help, during periods of high inflation, strife or unexpected market shocks. Because supply is threatened during this time, commodity prices will increase.

Commodities are excellent additions to portfolios to offset inflation risks. With them, you can invest in longer term bonds promising higher yields and offset the risk with commodities. If not, you’re better off investing in short to medium term bonds that have lower inflation risks.

Fixed annuities: Annuities aren’t for everyone, but they can be useful for retirees wondering how they can make their shrinking portfolios last longer. Fixed annuities are basically contracts given by insurance companies to provide fixed payments until the end of the annuity holder’s life. They offer just about the best security against the peaks and troughs of investment returns during that period in retirement when you’ll be spending your hard-earned gains.

As a bonus, you can actually receive higher payments by placing a lump sum in annuities compared with placing the same in a 30-year bond, if you outlive the life of the bond. The obvious disadvantage is that if you die earlier, the asset is lost. But this is a risk worth taking, considering that you will not need the asset if you’re dead. But while you’re alive, no matter how long you’re alive, you’ll have something coming in, unlike other investment methods where the risk of outliving your money is ever-present.

Conclusion

These are just a few alternative investment options. Clem Borkowski advises, “As with all other business dealings, it is very important to deal with highly reputable and accredited investors for your alternative investment portfolio. Talk to an expert and decide which options will work best given the current state of your portfolio and your present and future investment goals.”

ABOUT ASI CAPITAL, LLC

ASI Capital, LLC, a private debt and equity firm based in Colorado Springs, CO, helps individual investors invest with confidence in the ‘real’ economy. We offer access to investments based on alternative strategies – investments that fall outside the ‘traditional’ stock and bond markets.

For more information, visit their website at www.asicapital.com.

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