Alternative investments are generally private securities that do not trade on a public exchange and can include real estate, high yield debt, mortgages and private equity. Typically, these are illiquid investments with different risk profiles than public securities. Alternative investing has historically only been available to high-net-worth individuals, pensions and endowments however they are increasingly becoming more mainstream.
What are Alternative Investments?
To better understand the question “what are alternative investments” we need to define what traditional investing is. While definitions may vary, the most common explanation of traditional investing is a portfolio that is made up of 60% equities (stocks) and 40% fixed income (bonds). For investors who are more familiar with mutual funds or segregated funds, this type of portfolio is most reflective of a balanced fund.
Over the last 20 years alternative investments have become more accessible to the average investor. These investments should only be considered when the advisor recommending them is trained and knowledgeable of the risks of these investments. Investor alignment and the management behind these investments become two of the most critical factors to investment success. If management is paid the majority of their compensation after the investor, then management is well aligned with the investor to be motivated to be successful.
Why Invest in Alternative Investments?
Alternative investing, when executed carefully, can generate attractive risk-adjusted long-term growth and income while lowering the overall volatility of your portfolio. When managing the alternative component of a portfolio, we need to be cognizant of single asset risk or concentration risk. What we mean by this is alternative investments come to the market in different forms – some investments might be for a single business, or single real estate asset, while other alternative investments will bring a fund approach and will hold multiple assets. As you can appreciate, a fund approach offers greater diversification and lowers the reliance on one single investment to deliver a targeted rate of return.
How do you Invest in Alternative Investments?
Alternative investments are mainly distributed through registered Dealing Representatives who belong to an Exempt Market Dealer. Russ Hafer and Sean Wilson are both registered with Exempt Market Dealer, Raintree Financial Solutions.
Who is Raintree Financial Solutions and what is an Exempt Market Dealer?
Raintree Financial Solutions is our Exempt Market Dealer. Raintree is responsible for reviewing and sourcing alternative investment products for its Private Wealth Advisors to distribute. Prior to being added to their product shelf, Raintree performs extensive due diligence and also may obtain third party due diligence reports before being made available to clients.