There are various reasons why alternative and private investing have grown in popularity in recent years. As we have stressed on these pages before, investors have been looking for greater returns than can be found in traditional public markets, such as stock markets, but also want acceptable levels of risk.
Traditional markets constitute unacceptable rates of returns for some investors for a few reasons. One is regulation, which includes disclosure requirements. In addition, from a macro-economic perspective, we’ve been in an era of low interest rates for some time, which tends to depress returns on traditional investments, and bonds in particular.
A viable alternative
As a result, investors have been increasingly looking to alternatives to the traditional investment markets. In fact, they’ve been looking to what’s often referred to as the alternative market, or the private investment market. In a nutshell, alternative markets consist of investment opportunities that aren’t as regulated as public markets, particularly regarding information disclosure, but, because they require investors and managers to do more of their homework, so to speak, the opportunity for returns can often be greater.
Hedge funds are an excellent example of an alternative investment type. Specifically, hedge funds are a pool of funds usually gathered from a group of large investors. These funds are managed by, you guessed it, the fund manager, usually for a fee. And hedge funds can often have a certain area of focus, such as precious metals, or equity financing.
A shrewd investment approach
The reason they’re usually called hedge funds is that they help protect investors from the volatility of the markets in general, but also from the uncertainty within their own portfolios. In other words, it’s an alternative to traditional forms of investing and, as such, is not subject to the same types of investment trends or pressures.
As with many forms of alternative investing, hedge funds give investors many kinds of freedoms they wouldn’t necessarily experience with other forms of investing. For example, you get to decide who else you invest with, who manages the fund, and whether that fund specializes in an area you’re actually interested in. That’s the attraction of alternatives investments like hedge funds. They put more of the power of investing and decision-making with the investors themselves.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.