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WHAT ARE ALTERNATIVE INVESTMENT FUNDS?
Alternative investments are non-traditional assets that investors can use to diversify their portfolios. They aren’t traded on public exchanges and aren’t as liquid as other types of investments. These investments include anything from properties, private equity, hedge funds, commodities, and art to cryptocurrency.
Alternative investment funds are pooled investment vehicles that invest in a variety of alternative assets. The goal of these funds is to provide investors with exposure to different alternative assets while decreasing risk through diversification.
Managers from Thales Capital structure funds differently, like limited partnerships, limited liability corporations, or trusts. Investors can invest in them via a private placement which is normally offered to accredited investors.
Alternative Investment Fund Types and Investment Strategies
Different types of funds are available to investors:
- Real estate funds. They invest in different properties, including residential, commercial, or industrial realty. These funds can be structured as real estate investment trusts or as limited partnerships. These funds can generate income from rent, capital appreciation, or both.
- Private equity funds. They invest in privately held companies that aren’t listed on public exchanges. These funds typically take an active role in managing the companies they invest in and aim to generate high returns by increasing the firm’s profitability.
- Hedge funds. They invest in stocks, bonds, commodities, and currencies. They use different investment strategies, including long/short equity, event-driven, or global macro.
- Art funds. They invest in art collections or individual pieces of art. These funds get income from the cost increase of the art or from leasing it out to museums or galleries.
- Cryptocurrency funds. They invest in Bitcoin, Ethereum, Litecoin, and other digital assets. These funds can generate returns from the appreciation in the value of the cryptocurrencies or from trading them on cryptocurrency exchanges.
There are also less popular types, like green investment funds or funds of funds. Their key difference is that they invest not in a particular asset, but in another fund. It helps maximize diversification.
Advantages and Disadvantages of Investing in Alternative Investment Funds
Alternative investments provide several benefits, such as:
- Reduced risk. Alternative assets are less correlated with traditional assets, which means they aren’t as affected by market changes. This can provide a hedge against economic uncertainty and market downturns.
- Higher returns. These funds can generate greater revenue than traditional assets, especially during economic declines and with the proper asset management. These investments are often less affected by market volatility and can provide consistent returns.
- Access to unique investment opportunities. Alternative investments provide access to unique opportunities that aren’t available in traditional assets. For example, investing in art, micro finance, or cryptocurrency can provide exposure to assets that have the potential to appreciate significantly in value.
However, it’s important to thoroughly study and understand the risks related to each alternative investment option before investing in any asset, be it a master feeder fund or any other type described above. For example, crypto funds, despite being quite promising, can decrease in price unexpectedly because there aren’t any real assets behind these tokens. By diversifying your investment portfolio with alternative investments, you can improve your chances of achieving your financial goals.