Safer, stronger financial choices can be made through alternative investments. By prioritizing alternative strategies that operate outside traditional investments, investors can find assets that don’t just protect their portfolio but may even overperform in times of uncertainty.
Explore with Christina the potential alternative investment funds in LA have for investors and why this is an ideal time to get involved.
What Is an Alternative Investment?
Alternative investments are assets that are not considered in the same category as conventional investment asset classes. The world of finance presents innumerable investment opportunities. Some are more familiar to conventional investors than others.
Common examples of conventional investment assets include cash, securities, stocks, and bonds. More often than not, these kinds of assets are more popular investments for everyday investors because of their relative ubiquity; it is far easier to acquire stocks and bonds than alternative investments like real estate.
Alternative real estate investments refer to investments that are traded outside standard trading nets like the New York Stock Exchange. While the exchange may be a prevalent means to make investments for everyday investors, alternative investors provide a detailed, high-reward opportunity to investors who have the opportunity to get involved.
What Are Examples of Alternative Investments?
A number of assets or investments may be considered alternative investments. What unites them together is the fact that they do not operate within the same trading nets as conventional investments, like stocks or bonds. More often than not, accessing alternative investment opportunities requires investors to go through specialized funds.
Here are a few examples of alternative investments that warrant your consideration:
- Hedge funds
- Real estate
- Private equity
- Venture capital
- Arts and antiques
- Commodities
- Derivatives contracts
- Managed futures
What Is the Difference Between Alternative and Conventional Investments?
Conventional Assets Must Abide by Strict Regulations
The primary reason for the ubiquity of conventional investments is the fact that they face a high degree of scrutiny. Regulatory government bodies like the Securities and Exchange Commission set requirements that qualify whether a stock can be traded publicly. (Note that the SEC has a broader range of authority, while the self-regulatory FINRA oversees brokers and dealers.)
In the wake of the Stock Market Crash of 1929, the federal government enacted laws that set strict standards on investment both on Wall Street. Since then, federal legislation regulating
investing in the United States has continued to profoundly impact the kinds of investments most Americans can make.
From the Investors Act of 1940 to Dodd-Frank, the financial world must follow strict standards if they intend to interface with the general American public.
As a result, conventional investment opportunities available to the American public are required to make certain assurances to the average shareholder: publicly traded companies must be registered with the SEC. Owning a share of a company does not put investors on the hook if it goes bankrupt.
While the measures that regulate conventional investment opportunities keep them safe, they also limit the scope of the return they can produce. They are hamstrung by regulations that limit their potential. Alternative investment opportunities may not face those same limitations on their potential.
Alternative Investments Face Fewer Restrictions
Whereas conventional investment opportunities must abide by strict regulatory guidelines, alternative investments may exist and operate without those same restrictions. The reason behind regulations on conventional trading is consumer protection: When investors put their money into the market, regulatory bodies ensure their finances are not completely at risk.
However, investors who reach certain financial thresholds have the ability to participate in investment opportunities outside conventional methods. Alternative investment opportunities are able to eschew regulatory stipulations in order to net their investors stronger returns.
Because of the increased level of risk, most alternative investment opportunities must be selective with the investors they bring on. Investors that can sufficiently demonstrate a certain level of wealth and financial acuity have the opportunity to invest in alternative investments. These high-net-worth individuals are known as accredited investors.
How Do You Become an Accredited Investor?
Accredited investors (also called institutional investors) are deemed as such when they meet specific financial qualifications set by the SEC. Federal securities laws outline the requisite standards by which investors are sufficiently qualified to participate in alternative investment opportunities.
Rule 501, Regulation D of the Securities Act of 1933 outlines these guidelines for qualification as an accredited investor for individuals:
- The individual must possess an individual net worth, or joint net worth with a spouse or partner, exceeding $1,000,000. The individual’s primary residence is excluded from their net worth.
- The individual most demonstrably produces an income of over $200,000 in the past two preceding years; joint incomes for the two preceding years between the individual and their partner or spouse must exceed $300,000.
Should an individual meet these standards, they are implicitly qualified to participate in alternative investment opportunities. Accreditation is not official; rather, accredited individuals seeking to invest through an investment opportunity, like an alternative investment fund, must establish their accreditation before signing on.
What Are Alternative Investment Funds?
Alternative investment funds specialize in alternative investment opportunities. Generally, they are limited partnerships, an exclusive working relationship between a select pool of investors and the fund managers.
A given fund may specialize in a specific area: hedge funds, venture capital funds, or private equity real estate funds. Nevertheless, alternative investment funds possess the flexibility and freedom to pursue premium opportunities in their field. They are not held back by the same regulatory red tape as publicly-traded investment opportunities like mutual funds or ETFs (exchange-traded funds). Some prefer to do multiple types of investment management techniques in an attempt to protect against risk; this is called asset allocation and diversification.
Because of their selectiveness and their AUM of alternative investments, the majority of alternative investment funds are only available to accredited investors. Most alternative investment funds will have high minimum investments required to participate. However, alternative investment opportunities typically generate stronger returns.
What Alternative Investment Fund Should You Pursue?
With so many alternative investments to consider, choosing one that suits your finances depends on your financial situation and larger economic trends. Typically, alternative investment asset management provides investors with a hedge against larger market conditions and trends.
Alternative assets tend to have a low correlation with conventional investments on the exchange. That means that when the stock market performs poorly, many alternative investment asset classes stay the course (if not perform better) as conventional investments dwindle.
With rising inflation predicted for the foreseeable future, the stock market may be in peril. As consumer spending shrinks, investments in the exchange shrink and create a disastrous market. There’s never been a more opportune time to invest in alternative assets, and few alternative assets are better suited to combat inflation than real estate.
Why Is Real Estate So Special?
Real estate is a distinctive capital asset due to four special characteristics that inform its market performance. By its very nature, real estate is best suited to endure economic turbulence caused by inflation because of these four properties:
- Scarcity
- Improvability
- Permanence of Investment
- Location
Scarcity
The inherent scarcity of real estate means that supply is perennially low. Supply and demand is a fundamental dynamic that drives value in real estate: high supply and low demand translate to low value; low supply and high demand translate into high value.
When it comes to investment products, real estate is inherently scarce for two reasons: Land is a finite resource, and development is slow. For every lot that is zoned, developed, and sold, the total supply of land in a given area is irrevocably exhausted; it’s impossible to create more land. The development of new property is a deeply time-consuming and expensive process that can take years or even decades to accomplish.
Together, the finitude of land and the slow pace of development creates a low baseline supply that rarely, if ever, exceeds demand. Property is almost always in demand: people need housing; businesses need commercial space to rent. Real estate is ideally situated as a low-supply, high-demand investment that is almost guaranteed to increase in value, no matter the outside factors in the market.
Improvability
Investments that present a direct opportunity to increase its value are few and far between. Real estate is different: investors can actively participate in the value of their property, raising its value by improving it.
Conventional investment opportunities like securities provide investors no control over the value of their investment or their return. Once an investor buys shares of a company, the increase or decrease of that asset’s value is entirely out of their hands.
In a bearish market, that lack of control and volatility can be devastating, especially for illiquid stocks. Additionally, when playing the long/short game (like with the viral short-selling fiasco of 2021), the losses can be catastrophic.
As physical property, real estate can be physically altered and improved upon. In so doing, investors take an active role in the value of their property, adding to its value and thereby increasing the potential of their return.
Whether the alterations are minor or major, improvements on a property will have a direct impact on the value of the property, giving investors a recourse to affect their return.
Permanence of Investment
Stability is a key attribute investors want out of their portfolios, especially in times of economic uncertainty. Real estate assets possess unparalleled stability due in large part to the permanence of investments in real estate or their fixity.
Real estate is unique in that it presents the opportunity for additional investments in the property itself. Capital infusions in a physical structure like real estate are effectively permanent. Fixity describes the ability to hold the value of investments. Few investments have the fixity of real estate.
Real estate has strong fixity because, as a physical property, capital infusions in the form of physical alterations are effectively permanent. Large projects concerning electrical work on a property or the septic system are expensive structural endeavors that become integral to the property itself. By making structural alterations that are effectively permanent, a property’s value is raised permanently in turn.
Like natural resources, real estate is a real asset — making valuation a slightly more concrete matter.
Location
Location has a seminal effect on the value of real estate. Businesses look for prime property to draw in a crowd; residents look for an environment to raise their family; the influence of location on demand for property cannot be understated.
Location has such a profound effect on property value that a carbon copy of the same exact property can be vastly different depending on where it’s located. That means location is a strong variable that investors can factor into the properties they acquire and therefore make smarter choices.
Being able to choose real estate based on locational features empowers investors with the ability to make informed choices that aren’t available in conventional trading spaces. Real estate investing rewards research; when you find a location that warrants investment, you’ll see that investment pay off with a larger return.
Why Choose Los Angeles Real Estate Investment Funds?
Los Angeles real estate investment funds are the perfect confluence between two high-performing alternative investment asset strategies: private equity and real estate. Let’s explore what makes Los Angeles real estate remarkable and why investing with a private equity real estate fund is your best option for acquiring L.A. real estate.
Why Is Los Angeles Real Estate So Effective?
- Legacy of wealth
- Strong economy
- Great location
Legacy of Wealth
For over a century and a half, Los Angeles has been home to the most explosive real estate market in the country. Many of L.A.’s wealthiest neighborhoods originate from extreme wealth that saturates their respective real estate market to this day. These neighborhoods were founded with vast amounts of money and continue to hold the value and then some.
The Westside region was developed by turn-of-the-century oil tycoons to house their palatial homes. Over the decades, new generations of wealth from new industries came to call the premium real estate of the Westside home. While the names change, the Westside nevertheless endures as a bastion of high-value real estate.
Strong Economy
Los Angeles is the largest city on the West coast. Its vast population speaks to its economic stature; L.A.’s GDP is larger than some countries. Underpinning L.A.’s titanic economy are a few distinctive features singular to L.A.
First, Los Angeles is home to the largest port in the Western hemisphere: the Port of Los Angeles. Second, L.A. is the world’s center for media and entertainment; Hollywood is virtually synonymous with the multi-billion dollar film industry. Third: Los Angeles has established itself as a global hub for tech start-ups in the wake of the Silicon Beach phenomenon.
Los Angeles’ economy is vast, held up by idiosyncratic pillars of industry that ensure that the city is a hub for capital. With enduring capital circulation in the Los Angeles economy, the L.A. real estate market, especially in high-demand areas, is virtually guaranteed to remain strong.
Great Location
People move to Los Angeles in droves because it encapsulates everything people want out of sunny California living. Los Angeles has warm, 70 to 80-degree weather year-round, making it one of the most ideal climates in the country.
What’s more, the city has access to trademark natural features that make Los Angeles real estate all the more alluring. The Westside, in particular, is host to peerless natural sights that make for one-of-a-kind real estate; beautiful beachfront property along the Pacific Coast; hillside views of the Santa Monica mountains, and gorgeous vistas over the entire city.
How Should You Invest In Los Angeles Real Estate?
Real estate stands apart as a distinctive alternative investment; Los Angeles real estate stands apart amongst real estate assets. Finding the best way to invest in Los Angeles real estate means that you’re making a premium investment in premium assets.
There are a number of ways investors can get into real estate. Individual property ownership is fairly common. Investors will acquire properties and then either rent out the property or flip the house for a profit.
While this investment strategy has the potential to be lucrative on paper, it can be extremely difficult to manage on one’s own. Property ownership is extremely time-consuming and costly, especially for premium Los Angeles properties. The best way investors can access ultra-high-value real estate assets like Westside properties is through a private equity real estate investment fund.
Why Choose a Private Real Estate Investment Fund?
Few alternative investment funds have the growth potential and stability that define private real estate investment funds. As an investment vehicle, private equity in real estate assets gives investors the closest possible investment into premium properties without the burdens of property management.
When it comes to meeting your investment objectives in real estate, you can choose between public and private equity.
REITs (Real estate investment trusts are owned by public, not private companies. REITs are required to pay out dividends but are far riskier than private real estate investment firms.
Private equity has outperformed the public market for over two decades. Private equity funds have the resources to not only optimize property management but the legal know-how to utilize tax breaks that net investors the best possible return.
Investing in real estate private equity is a financial lock that is a surefire means to grow your finances, even in the midst of a worsening economy.
Investment Decisions
For over 40 years, Christina has found resounding success in L.A.’s most competitive real estate: the Westside. Our team proved year after year that Christina has the skill set, the network, and the portfolio to connect you with the best real estate assets Los Angeles has to offer.
Get started with us today and protect your finances with Los Angeles real estate assets tomorrow.
Sources:
Why Is Inflation So High? | Forbes
§ 230.501 Definitions and terms used in Regulation D. | Code of Federal Regulations
Private equity will still outperform public markets in the next recession | Fortune
Total Gross Domestic Product for Los Angeles-Long Beach-Anaheim, CA | FRED
GameStop: how Reddit amateurs took aim at Wall Street’s short-sellers | The Guardian