The terms bonds and alternative assets don’t always come together, do they. There are a number of reasons for this. Most notably, when investors turn to the alternative markets, they often do so seeking higher returns, and these higher returns are often associated with more glamourous or high-profile types of assets, such as hedge funds, venture capital, corporate finance — you name it.
However, as a recent CNBC article points out, bonds can in fact be a very rewarding aspect of alternative investing. But, as has already been suggested, the problem is that too few people really know anything about them, or about the value they bring to an investment portfolio, especially one unafraid of the alternative markets.
As always, it’s about the returns
As the article specifies, the allure of non-traditional bonds is that they can offer returns that are greater than those of, you guessed it, traditional bonds. Indeed, this reasoning is why the alternative markets exist in the first place, isn’t it. People are seeking greater returns than those offered by the traditional markets. It’s that simple.
When it comes to non-traditional bonds, the challenge isn’t only that investors aren’t aware of them, but the fund managers and experts are also not as aware of them as they should be. What does this mean to the forward-seeking investor? It should mean opportunity. When others have yet to see the value in an investment opportunity, it’s like fishing where the fish are, while others are fishing elsewhere.
So, are there specific areas of investing in non-traditional bonds that are particularly appealing today? Yes. According to the CNBC article, current sectors that are attracting growth in non-traditional bonds include the environment (green bonds), foreign currency, and emerging markets, as well as state municipal bonds reaping the rewards of tobacco court settlements.
If nothing else, the area of alternative/non-traditional bonds should serve as a further reminder that opportunity awaits in the world of alternative investing as long as there’s a match between investors looking for the greener pastures of higher returns, and investment opportunities that specifically provide that in ways that constantly evolve over time.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.