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Now is the Time for Alternative Investments!

Investments into the building of the transcontinental railroad began the alternative investments industry in the United States in 1852. It has branched out into an international market in recent years, creating new opportunities to use strategies that have already run their course in the United States.

The alternative investments industry has grown in popularity and accessibility over the last fifteen years, largely due to the global economic downturn of 2008.

When the public markets crashed, many individuals who relied heavily on traditional investments saw their investments plummet, leading them to explore alternative investments.

As part of a diversified investment strategy, alternative investments are increasingly available to retail, or individual, investors as well as high-net-worth individuals and institutions. About 20 years ago, big U.S. pension funds invested less than 5% in alternative assets. By 2022, they might invest more than 35%.

2022 Preqin Global Alternatives Reports reveal that if in 2015 the AUM  allocated to alternatives stood at $7.23tn, at the end of 2021 it jumped to $13.32tn and in 2026 Preqin believes it will reach $23tn. Investors need to diversify their investment portfolios and spread their risks in today’s volatile capital markets. Alternative investments offer to hedge against inflation, which includes investment opportunities.

Doron Israel, financial planner and insurance agent

Alternative Investments: What are they?

In addition to stocks and bonds, alternative investments include commodities, private equity, hedge funds, structured products, venture capital, and real estate.

Around the world, we can see people investing in those products to achieve a diversified portfolio. A low correlation to the stock market makes alternative investments ideal for reducing the volatility of a portfolio. 

The 3 Main Reasons for Alternative Investing’s Rise?

  1. In the wake of the subprime mortgage crisis, individuals who had relied heavily on traditional investments saw the value of their investments plummet, leading many to explore alternatives. When the public markets crashed, the value of traditional investments plummeted, which led many to explore alternative investments.
  2. Public Companies Went Private After the Recession – perhaps to restructure and rebuild before going public again. This led to a shift in investment opportunities to the private market, making alternatives an attractive option for many who hadn’t considered them before.
  3. From investing in markets to a “set it and forget it” mentality, investor behavior changed. The value of traditional investments, such as publicly traded stocks, fluctuates constantly. The “active” part of traditional investing happens when you decide when to buy and when to sell. Alternative investments, however, have much longer time horizons and are typically illiquid-they won’t produce returns for months or even years, and there isn’t much you can do until then. As long as you wait to be paid out, alternative investments can give you peace of mind that you didn’t miss the chance to buy or sell.

These three key trends continue to shape the industry’s future.

Is inflation a Concern for us?

No, but we need to act to increase the value of our portfolio.

I wrote an article a year ago that discussed how to diversify a portfolio to decrease inflation risk. My expectation is that the market will be at a high level of volatility this year because of the inflation that is mostly coming from the supply chain side: Gas, cars, energy, and commodities like iron, copper, and coal.

Nowadays, we can take advantage of many professional players in the alternative investments sector. 

The advantages of such a trend:

  •       Big return on the investment
  •       Low Beta to the market
  •       Getting certainty about our goals
  •       Professionals
  •       Securing

Disadvantages:

  •       Liquidity
  •       High entrance ticket

We See, that inflation is like any other tax we pay, and today the question isn’t whether we should invest in alternative investments, but how to do it correctly.

Alternative Investing: What is the Future?

A survey conducted among 500 institutional investors worldwide reveals that the hottest investment sectors for private markets in 2022 will be: information tech, healthcare, infrastructure, energy, and real estate. 

The survey shows that institutional investors also believe that alternative investments will become a significant factor in the investment market very soon, with a large portion of the areas noted in the survey about alternative investments.

Alternative investments have the potential to continue growing in the future, but they may also shift in response to several timely events.

Each year, new types of alternative investments emerge, such as the decentralized digital currency Bitcoin. New things are always being introduced. With both globalization and increasing ideas and technology, there are always new opportunities to prosper, and this will mostly occur in the alternative arena. The world of alternative investments is so exciting because those new ideas for making money will almost always be couched in the language of alternative investments.

The article was written in collaboration with Doron Israel a financial planner and insurance agent, specializing in alternative investments.

About the Author
Dan Dobry was the founder of the Union of Financial Planners in Israel (UFPI), served as the first Chairman and President of UFPI. Dan was the Global Council Representative for Israel for the Global Community (FPSB) from 2012 - 2018 and from January 2019 is a member of the Committee for Standards and Qualifications for the European Union (SQC).
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