Investing in Alternative Assets
Alternative Assets mean different things to different people. We consider Alternative Assets to include Private Equity, Hedge Funds, Structured Products and Real Estate funds. Of course it is possible to invest in a much wider range of Alternative Assets than these. Direct property ownership, fine art, old coins and vintage motor cars (to name but a few) are popular and possibly rewarding Alternative Assets but not ones on which we are qualified to advise.
The main reason for considering an investment in Alternative Assets is to achieve additional portfolio diversification. Many Hedge Funds, for example, aim for steady positive monthly returns and try to avoid negative returns completely. This makes them quite different to equities and bonds whose prices can rise and fall quite sharply from month to month. So including an exposure to such assets in portfolios may do little to improve the long run return (and may even reduce it) but can significantly reduce short-term volatility of the portfolio.
For most private investors the appropriate method of gaining exposure to Alternative Assets is likely to be through collective investments because this route permits an additional degree of diversification, offers regular dealing opportunities and may allow indirect access to popular and successful funds that are otherwise "closed" to new investment.