Tag: alternative asset management

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What exactly is an “alternative asset?”

alternative asset definition

Alternative investing has grown in popularity over the years, for a variety of reasons. The most obvious reason is a desire to look away from traditional public investing, such as the stock markets. One of the keys to successful investing is to find an edge that isn’t available to others. That’s why alternative investing has succeeded because it’s, in part, the desire to seek uncommon investment opportunities.

But, in investing, it’s important to get the terminology right because a failure to do so can quite literally mean making bad investment decisions, which means losing money. None of us want to do that, do we.

Specifically, there might be some confusion as to what the term alternative investing refers to or, even more specifically, what the term alternative assets refers to. So, let’s take a closer look.

Not found in traditional markets

Alternative assets are essentially anything you won’t find in the traditional public markets. Stocks and bonds are most commonly associated with the public markets. That definition of alternative assets can leave wide open a lot of possibilities, can’t it, so the term alternative assets can be defined even further or, more accurately, divided even further.

One form of alternative asset essentially consists of rare holdings, or things people collect. So, examples of such alternative assets include things like rare coins or art. Now, many people wouldn’t necessarily consider such items as forms of investments, but they are. They tend to appreciate in value over time, and people who specialize in this type of investment can certainly benefit from high returns.

Another type of alternative asset is one that’s generally associated with professional investing, but not with traditional investing. So, examples of such professional types of alternative asset management include hedge funds, private equity, and other established alternatives that would be familiar to professional private investors.

More connected to investments

Now, real estate can also be considered a form of alternative asset, and we’re not talking about buying and selling properties for personal or business use, but for the purpose of buying and selling in order to make a return. This is probably one of the oldest forms of alternative investing, around which an entire industry of expertise has developed.

Yet, regardless of the type of alternative asset being invested in, there are some important common characteristics. In many cases, investors are seeking the kinds of returns you won’t find in public markets. In addition, alternative assets can involve a kind of personal expertise and connection you also won’t find in public markets. And the more knowledgeable and connected you are to an investment, the more likely you are to reach your investment objectives.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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Alternative investing and diversification

Alternative investing recession

One of the objectives of any investment portfolio is to protect oneself from potential risk. A common strategy in pursuit of this objective is diversification. In fact, it’s one of the basic measures historically used by investors to hedge against uncertainty. So, if one part of an investment portfolio is hit hard by economic circumstances, other parts won’t be — due to diversification. It’s Investment 101, isn’t it.

Well, this principle of diversification is one reason why alternative investing has been on the rise in recent years (in addition to other reasons, of course, such as higher returns, more manageable risk, etc.). Since alternative investments, by definition, constitute an alternative to more traditional investments, it also stands to reason that such investments are exposed to risk in alternative ways, too.

A wide range of alternatives

Alternative investment options

Of course, what adds to the potential for diversification with alternative investments is the fact that the definition of what constitutes alternative investments is very broad, too. They can range from investing in start-ups and venture capital, to expanding into fields that might be neglected by more traditional investments, such as technology, or even commercial real estate.

In fact, as expanded upon by investment specialist Dan Brewer, in an article published at Benzinga, something like commercial real estate possesses traits and features that could protect a portfolio from risk such as a recession, which as Brewer points out, some are predicting to be a 100-percent certainty within the next few years. Although any such prediction should be taken with a grain of salt, and any good investment portfolio should protect itself from all risk, including a potential recession. Hence, the focus of this article, right?

As Brewer points out, commercial real estate such as senior housing, multi-family housing, and self storage — all allow investors to weather the potential of a recession within the next few years. Why? Because they all have characteristics that make them less vulnerable in a downturn.

Various opportunities

So, for example, with senior housing, demographics show that as the population continues to age, so, too, will investment for housing for seniors. Recent research already shows that trend. The same goes for multi-family housing. As more people are seeking to rent such accommodations, space is becoming limited, thus increasing demand in the sector. Even the self storage sector is showing short- and long-term resilience because of the low overhead involved, and also because the need for self storage increases as residency uncertainty also increases during a downturn.

But these are only a few examples. The point is that alternatives exist for your investment portfolio that protect you from the risks associated with other more traditional investment options, including risks of a downturn or recession, which any good investment strategy should hedge against to some extent.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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The evolving investment landscape

Alternative asset investing

The field of investing wouldn’t be very attractive unless it changes and evolves over time. In fact, the very nature of successful investing involves finding opportunities other haven’t, or that have yet to be tapped. On the other hand, investing is also often about larger trends and movements of capital and investing.

As an example, let’s take gold mining in 19th century America. Or, as they called it: the Gold Rush. Everyone knew about the new opportunities available for speculators and miners, yet finding the right opportunities, and capitalizing where others had failed, is what separated the few success stories from the many more failures.

Capitalizing on opportunity

The same holds true in today’s investment landscape. There are many who jump on the bandwagon of new opportunities, but only a few can capitalize in a way that meets demanding investment objectives.

As an example, today’s investors, as reported by PwC, are looking at investment opportunities that emphasize investment outcomes versus products, as well as specialization versus commoditisation. As a result, these types of investments tend to provide customization, diversification, as well as long-term performance.

Indeed, this is what the landscape of alternative investing is looking like — today, and into the future. So, the larger trends are certainly in play, as they were during the Gold Rush. However, the key to success in the sector is to find firms capable of providing focus in an increasingly diversifying landscape.

It’s about data, but also about people

Another example pointed out by the PwC report is the increasing significance of data when it comes to alternative investing. As the saying goes, information is power, and this axiom certainly holds true in rapidly-developing fields of investing. At first, the gathering and manipulation of data will be the focus, after which analysis and reporting will provide investors with needed insight.

However, beyond the specific trends involved in new forms of investing, ultimately, as with so much in life, it’s about people. Forming relationships with people who have knowledge and insight moving forward will, just as in the days of the Gold Rush, separate the successful few from the others.

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