Why Invest In Alternative Assets?

What are the goals of large endowments?  They are similar to the goals of individual investors.  Preserve capital with some level of income, while increasing growth and long-term capital appreciation.  According to the New York Times, Harvard’s endowment has generated annualized returns of 12.5 percent over the last 20 years.  How do they do it?  With alternative assets.

The Harvard Management Company Endowment Report defines ‘endowment model’ as “a theory and practice of investing, first used by major endowments including Harvard, Yale and others starting in the 1990s. The model is characterized by highly-diversified, long-term portfolios that differ from a traditional stock/bond mix in that they include allocations to less-traditional and less-liquid asset categories, such as private equity and real estate as well as absolute return strategies.”

Three key points of the endowment model are that the investments are:

-highly-diversified

-long-term, and

–alternative assets.

Historically, alternative assets included art, wine, rare coins, and stamps. More recently, the term has also come to be used to refer to other assets including hedge funds, private equity, venture capital, real estate, and more.  These investments were not formerly available to individual investors, but are now available to accredited investors as a result of Rule 506 of Regulation D, which states that a “…company may sell its securities to an unlimited number of accredited investors…”

Investors in alternative assets may reap high rewards, provided that they do their homework and invest wisely.  There can be definite benefits in diversifying away from traditional assets.  Alternative assets offer a measurable degree of independence from market risk factors.  Adding a combination of alternative assets to a portfolio can help minimize risk and maximize return to sustain the portfolio during periods of weak market performance. Grolio provides investors with access to a variety of high-quality, pre-vetted alternative investments offering an array of opportunities to accommodate a range of risk/reward profiles.

Alternative assets are the answer for any accredited investor who is savvy enough to know where to look for them.  Are you an accredited investor?  Then look no further.  Contact us to learn about our high-quality investment products today.

What Are Alternative Assets?

Investopedia defines alternative assets as:

any non-traditional asset with potential economic value that would not be found in a standard investment portfolio

By definition, the unconventional nature of these assets can sometimes cause their valuation to be difficult.

Some examples of alternative assets include art, antiques, rare stamps, coins, and other collectibles. These aren’t the only assets that fall into the alternative category, however. Hedge funds, projects related to venture capital, convertible bonds, foreign currencies, preferred shares, ultra-cheap commodities and infrastructure are also considered alternative assets.

The economic downturn of recent years hit most investors particularly hard. However, those who had invested in non-traditional assets were not only able to survive the crash, but actually considered to see their wealth grow. Now that the opportunity to invest in such assets has been opened up to more investment classes, the time is perfect for those who wish to diversify their portfolios. When someone thinks of how to invest and what to invest in, alternative assets are often ov erlooked. However, once you know they exist, the fact that others don’t know about them can work to your benefit.

We can work with investors to provide alternative investments that they may not have had access to before. However, securities law has a requirement of our clients. These alternative asset opportunities are only available to accredited investors. In order to be, by law, considered an accredited investor, one must have an individual or joint net worth at the time of investment that exceeds $1,000,000, excluding the value of one’s primary residence; or an individual income in excess of $200,000 or joint income of $300,000 in the two most recent years and a reasonable expectation of the same level in the current year. Entities such as banks, savings and loan and some other types of institutions may also qualify as accredited investors.

To find out more about diversifying your portfolio through investment in alternative assets, contact us.