Old Alternatives

Previously, real estate investments were mostly homes, rentals, lots and raw land, until buildings, malls, condominiums and (more recently) real estate investment trusts got into the picture. Investments in commodities, without taking physical control of these, also developed from the days when evidence of physical availability had to be present. Equity investments in unlisted companies became popular with the advent of venture capitalism, in anticipation that success of these companies would result in value appreciation and subsequent listing.

Risks

Alternative investments were all previously considered speculative. Now most real estate transactions are considered sound investments, and even the new alternatives are considered sound investments by big pension funds. The advent of good professional fund managers and their proven analytical tools account for this confidence in the new alternatives among bigger investors. This confidence, however, has been eroded somewhat by the recent stock market debacle being attributed to derivatives and the greed of financial managers.

Other Characteristics

Alternative investments are generally less liquid than the traditional since they have no secondary market. Returns are not only more risky, but more volatile. There are also often transfer restrictions. There is normally less information as to the values and the prices of these investments. Fees charged by managers and minimum investment requirements are higher, and there is less regulation from government, giving investors less protection.

Investors in the New Alternatives

References

Resources

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