The Rise of Alternative Investments

Many investors have seen increased volatility in the markets in the past few years. The COVID-19 pandemic highlights the increased need for diversification for this exact reason. Alternative investments can be an attractive option when there’s uncertainty in traditional or fixed investment methods, such as equities and bonds.  

 

How & Why Alternative Investments Are Rising

Market disruption has led to increased interest in the alternative investment sphere, and we expect this growth to continue. Investing is all about looking for the safest way to maximize income. When we consider methods of protecting investments, diversification will always come to mind. Alternative investments allow investors to diversify their portfolios into markets that may operate independently from traditional markets. This protects investment capital should there be a downturn in a fixed sector. 

Alternative investments also increase potential income for investors. Traditional investments have been producing reduced returns and are known to take a more moderate or reduced risk approach that often offers less reward.  

As investors look for methods to increase returns and diversify in case of large-scale economic downturns, alternative investments become the only attractive option. This is why we’ve seen an increase in alternative assets among Canadian Pension Funds, high-net-worth individuals, and asset managers. 

Here are a few other characteristics of alternative investments that make them attractive to investors:

• Mitigate volatility
• Predictable growth rates
• Capital growth and Income options
• Independent nature with minimal correlation to other assets
• Less regulation in some cases
• More direct control 

 

How to Use Alternative Investments

Traditionally, the alternative investment sphere was made up of high-net-worth individuals and institutions. This may be why we’ve seen such an increase in these markets. Retail investors can now tap into the benefits of the alternative investment sector. 

Directly investing in alternative assets is still a pricy commitment that’s out of reach of many. It’s unlikely that a retail investor will be able to independently invest in a portfolio of commercial properties. However, in recent years many new methods have made this possible.

Limited Partnerships (LPs) are private funds that are managed by firms comprised of experienced experts. LPs allow investors to invest in alternative investments through managed funds that would otherwise be out of their reach. However, many of these LPs charge high fees that detract from the increased potential income that alternative investments offer.

Private Real Estate is a more traditional method of alternative investing. An investor may choose to invest in income-generating property such as an apartment complex or a rental. This alternative strategy means the investor is entirely in charge and is the primary contact with any tenant. This comes with its own challenges and headaches.

Mortgage Investment Corporations (MICs) offer investors the chance to invest in a variety of mortgage-backed investments. Mortgage pools are debt-based investments. This provides more security as the investment is protected by the real estate’s value and must be paid back by the borrower. A growing number of investors are looking to MICs due to their security, diversified nature, and independence from many other markets. 

If you’re interested in learning more about mortgage pool investing with a MIC, get in touch with Jordan on our team. Alternative assets are rapidly growing, and now is the time to take advantage. Investing in a mortgage pool could be the perfect way to increase your income while diversifying your portfolio further.