With so many compelling, professional investment opportunities to choose from, finding the one that best suits your needs can be a challenge.
Explore with Christina why you should turn to alternative investment fund managers, especially those that manage premium real estate assets.
What’s So Special About Alternative Investments?
Professionally managed funds are abundant. Alternative investment funds stand apart from conventional investing opportunities because of their investment strategies and/or the assets under their management.
As opposed to alternative investments, conventional investments typically feature publicly traded stocks and bonds, securities, and even cash investments. Alternative investments refer to an expansive range of opportunities.
Here are a few examples and how they work:
- Private equity
- Hedge funds
- Venture capital
- Real estate
Private Equity
Private equity generally refers to limited partnership investment funds acquiring and restructuring companies. Equity refers to the total value of a company or asset — the sum value of all of its assets subtracted by associated debts and liabilities.
Private equity investing aims to take on the majority equity holdings of publicly traded companies, thereby gaining executive control over the assets and the ability to direct the company towards profitable ends. Private equity funds can be deeply complicated and staffed with highly educated managers, legal experts, and logistical experts.
Hedge Funds
Hedge funds use pooled investments through intimate, limited partnerships to net their investors high-reward returns. Hedge funds are famously versatile.
Unlike conventional investment opportunities like mutual funds, hedge funds face few limitations in the style and strategies in which they earn their investors an income. These funds often utilize financially complex maneuvers like short selling or derivatives to generate substantial returns.
Venture Capital
Similar to private equity funds, venture capital funds invest starter capital in startups and fledgling companies in their early stage phases of development. Venture capital managers will supply these companies with the capital they need to accomplish key aspects of early-stage development.
While they have yet to earn an income, venture capitalists will help with prototyping product development, market research, building a logistical network, and so on. In exchange, the seeded companies will offer favorable terms through their equity offering — when the company takes off, so does the venture capital fund.
Real Estate
Real estate is a wholly unique alternative investment that many investors turn to in times of economic duress. There are many ways to invest in real estate, including investing in income-earning properties like rentals, flipping houses, or investing with professional outfits like private equity real estate firms. Real estate is well-known for its many benefits, which help investors net stronger returns even in challenging economic periods.
Why Choose Alternative Investments?
The unconventional opportunities made available through alternative investments make them ideal during periods of economic uncertainty.
The stock market is one of the first areas to take a hit in the early days of a recession. When consumers feel the strain on their finances, they are less likely to invest in the stock market. As a result, confidence in the market staggers and drops as more and more conventional investors lose faith in the exchange.
Alternative investment opportunities eschew prevailing market trends. In fact, they often provide investors a counter-balance to marketing trends by virtue of asset uniqueness and the wide range of strategies alternative investment fund managers employ.
Here are a few key ways alternative investments provide investors with a solution to a weakening economy:
- Hedges the market
- Diversifies your portfolio
- Outperforms the public sector
Hedges the Market
Alternative investment fund managers have access to assets and investment strategies that don’t just offset market collapse but use them to their advantage. The flexibility of many alternative investment funds means investors can find financial stability during uncertain times.
Versatile managers for alternative options like hedge funds use a range of financial maneuvers, allowing them to adapt to every economic scenario. Short selling and leveraging are key strategies to earn stronger returns when the stock market is in a weakened state.
Real estate is a known inflation hedge as well. Rental properties are able to absorb rising costs in the market by passing them on to tenants. Rising prices across sectors typically raise the sales prices of homes, driving up properties’ already established high appreciability.
Alternative investments provide investors with a means to endure economic turbulence, particularly sub-par performance in the stock market. When put in the right hands, alternative investment funds can make the best of a bad situation in the market, which may be even better than you’ve expected.
Diversifies Your Portfolio
The stability offered through alternative investments hinges on a key attribute that distinguishes them from competing for conventional investments: diversification of your portfolio. A diversified portfolio is a stable portfolio. While diligent analysis rewards investors with better returns, there is no complete certainty in how your portfolio will perform.
Diversification of your investments is a keystone means to ensure that your portfolio performs in every kind of economic scenario. The more diversified your portfolio, the lower its correlation to larger market trends. Your portfolio is able to churn about consistent returns, despite what happens in other sectors.
Alternatives, by their very nature, diversify your portfolio. Alternative investment managers can connect you with low-correlation assets like real estate to ensure that your portfolio can continue to perform independently of market trends.
Outperforms the Public Sector
Whether in good times or bad, alternative investments are the best choice for investors because they regularly outperform public options. Publicly-traded investments like stocks and bonds do not have the same return as private equity opportunities investors can find through alternative options.
Analysis of private equity’s performance in prior economic crises in 2008 indicates that it easily outperforms popular public indexes like the S&P 500. Private equity outfits had an internal revenue return of 61% around that time, whereas the S&P 500 had an annual return of -36.55% in 2008.
A prevailing reason why alternative investment funds succeed in crises is the impact managers have on the fund. Managers in alternative investment funds have better access to capital and more opportunity to act fast on behalf of their investors.
Alternative investment funds are not hamstrung in the same way mutual funds may be. That means in bull markets, alternative fund managers have the freedom to seize every opportunity to optimize your return. During bear markets, alternative fund managers have the flexibility to save your return from calamity.
Why Go With Alternative Investment Fund Managers?
Alternative investment fund managers play a key role in netting the best possible return with your investment; they are the ones making the financial decisions that sustain your portfolio’s performance.
Alternative investment fund managers stand apart from conventional managers for a number of reasons. Chief among them is the fact that alternative fund managers are paid better than their counterparts.
Fees and payment structures in alternative investment firms pay out more favorably when the fund does well — to both the managers and the investors. Alternative managers have more incentive to make more money because they make more money as well.
The promise of better opportunity through alternative funds means that they are generally managed by the best and brightest the financial world has to offer. When managers stand to make more money working through an alternative fund, the brightest, most hardworking people in finance will gravitate to the position.
How Can You Invest With an Alternative Fund Manager?
Alternative funds operate in a number of ways. Some funds are vast operations with floors of staff. Others are intimate outfits with a few elite managers. Investing with an alternative fund is a great opportunity; investing with an alternative fund may depend on your financial status.
Alternatives operate without the same restrictions as the hamstring conventional, exchange-based opportunities. While those restrictions mitigate the potential return on conventional exchanges, they protect investors from potential risks.
The Securities Act of 1933 is landmark legislation that establishes the legal guidelines investment opportunities must abide by in order to be publicly traded. The Securities Exchange Commission is one such regulatory body that monitors publicly traded options. Any company that is publicly traded must be registered with the SEC.
However, alternatives do not need to be registered with the SEC. As a result, the Securities Act and subsequent financial legislation have established what investors can participate in unregistered investment opportunities: accredited investors.
What Are Accredited Investors?
Accredited investors are high-net-worth individuals whose financial status qualifies them to invest in unregistered opportunities. By meeting sufficient wealth standards, accredited individuals are implicitly entitled to make high-reward, high-risk investments. Their wealth indicates that they both possess the means to endure deeper losses in riskier endeavors and the financial acuity to make informed investment decisions.
Many alternative investment opportunities require substantial minimum investments in order to participate. Furthermore, the level of involvement investors take in an alternative outfit may require long-term, illiquid investments. Investors seeking to participate may have to be willing to put substantial money down for an extended period, a level of commitment many retail inventors simply cannot afford.
Alternatives managers may be more selective with the inventors they bring on as a result. Generally, fund managers will meet with potential investors only if they can demonstrably prove their accredited investor status.
How To Become an Accredited Investor?
There is no official accreditation process in which individuals become minted accredited investors. Rather, accreditation is determined by whether an individual meets certain standards. The standards that qualify individuals as accredited investors are outlined in the Securities Act Rule 501, Regulation D.
High-net-worth individuals qualify as accredited investors if they meet these financial thresholds:
- A potential investor has an individual net worth or joint net worth shared with a partner or spouse exceeding $1,000,000 dollars; the primary residence of the individual is exempt from the total value of their qualifying net worth.
- Individuals can demonstrably show they have earned an annual income exceeding $200,000 dollars in the preceding two years; joint annual income between spouse or partner must exceed $300,000 dollars a year.
If an investor meets these financial criteria, they are implicitly recognized as accredited investors. As an accredited investor, new investment opportunities emerge. While they may require deeper financial involvement, alternative investments can provide accredited investors with better returns than they can be found through conventional trading avenues.
What Kind of Alternatives Manager Should You Go To?
Accredited or not, the opportunity to invest with an expert alternatives manager is worth your consideration. What kind of manager you choose depends on your financial situation and prevailing market trends. Choosing the right manager at the right time can make all the difference in the quality of your return.
Economies the world over are wracked by rising inflation. While inflation can have devastating effects on conventional investing opportunities in the market and on savings funds, alternatives can endure and prosper during inflationary periods.
Few alternatives have the same inflation hedge capability as real estate assets. A few real estate investment opportunities are as high potential as private equity real estate investment funds.
Private Equity Real Estate Funds vs. Individual Property Ownership
How you invest in real estate will determine the success or failure of your investment. While individual property ownership has the potential to net you 100% of your return, it comes with a number of obstacles between you and a complete return. Private equity real estate funds connect you with managers that have the skill set, the resources, and the capability to optimize your investment.
Here are a few reasons why you should invest with a private equity real estate fund manager:
- Less risk
- Less work
- Less expensive, better return
Less Work
Property ownership is an intriguing investment because, on paper, it presents a high potential for a return that goes right to the individual investor. Realizing the potential of your investment is another story.
On your own, maximizing the potential of your real estate asset is a full-time job. Managing the property, keeping up with repairs, drafting up leases, finding and screening tenants, collecting rent, and utilizing the tax advantages available to you as a real estate investor is too much for one person to manage. In fact, many property owners hire third parties to manage these duties, eating away at their return.
Investing with a real estate fund is far simpler by comparison. Funds have the resources and the capability to maximize the potential of your investment. Investing through a real estate fund manager means less work for a better return.
Less Risk
Acquiring and managing property has the potential to net you a full return. As a solo investor, you are the first to net the return on your real estate assets. However, as a solo operation, you also face greater risks when things go wrong. If you go it alone, you increase your risk of facing cascading financial burdens.
Property ownership is a lucrative investment, but there’s a lot that can go wrong. Property can face catastrophic damage at a moment’s notice. A property could sit vacant for an extended period of time, bleeding money.
In a worst-case scenario, evicting delinquent tenants can be a financial nightmare. As an individual holder of real estate assets, you’ll face the brunt of these risks on your own. Alternatively, investing with a fund minimizes the risk of losing your return.
By investing with a fund manager, you are not alone when facing these risks. You have a professional ally to guide your investment through thick and thin to lessen the chances of your asset floundering and increase the potential return your investment can produce.
Less Expensive
Real estate is one of the most high-value alternatives investors can find. Real estate’s high value translates to stronger benefits, especially premium assets in places like Los Angeles. Investors interested in real estate assets typically find higher appreciability, stronger cash flow, and more stability in premium assets.
However, premium real estate assets are extremely expensive, so much so that even high-net-worth individuals struggle to acquire them on their own. Hyper-value real estate assets in premium locations like the Westside region of Los Angeles have sales prices in the multi-millions. For individual property owners, the best real estate assets remain inaccessible.
Investing through a fund manager gives accredited investors access to these blue-chip properties without the inordinate financial thresholds. With a pooled investment fund, the best properties on the market are within reach.
Invest With The Best
For over forty years, Christina has stood above its peers as the leading private equity real estate investment firm in the Westside.
Our team has been able to thrive in this hyper-competitive market because we have the resources, extensive skill set, and ever-expanding network to connect investors with the most high-potential assets the Westside has to offer.
Get started with the managers at Christina today, and protect your finances for tomorrow.
Sources:
Private equity will still outperform public markets in the next recession | Fortune
§ 230.501 Definitions and terms used in Regulation D. | Code of Federal Regulations