The world of alternative investments is expanding rapidly, offering investors a variety of opportunities beyond traditional stocks and bonds. When considering alternative investments, there are four main ways to invest: private syndication, RIA through an advisor, broker-dealer through an advisor, and direct investments for larger investors. Private syndication can be risky due to minimal regulation and the presence of unethical players, so investors must do thorough research before investing in this area.
The RIA channel allows investors to access accredited alternative investments through their advisor, while the broker-dealer channel is the oldest and has seen the emergence of many successful alternative investment companies. Regardless of the channel chosen, the sheer number of alternative options can be overwhelming. Key factors to consider when evaluating alternative investments include legal, ethical, and moral unfair advantages, economies of scale, access to off-market deals, and a track record of performance during down cycles such as the financial crisis of 2008 or the challenges of 2020.
An example of a legal, ethical, moral unfair advantage can be seen in the world of QSR restaurants, where certain private equity firms have secured exclusive deals with retiring franchise owners. Economies of scale can play a critical role in alternative investments, with many firms employing strategies to boost ROI by aggregating small investments into larger portfolios. Access to off-market deals can provide a competitive advantage in negotiations and the overall success of an investment, as companies with better access to information and products are more likely to secure favorable terms.
Finally, a track record of success during down cycles is essential when evaluating alternative investments. Companies that have demonstrated their ability to navigate challenging economic conditions and put their investors first are more likely to deliver positive returns over the long term. In today’s complex landscape of alternative investments, these factors can serve as a guide for investors seeking opportunities with the best potential for success and stability. Frederick Hubler of Creative Capital Wealth Management Group provides insights into alternative investment strategies and emphasizes the importance of careful research and due diligence when selecting alternative investments.
