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Alternative Investments
Definition
Alternative investments represent an alternative to what are normally thought of as traditional asset classes, namely stocks and bonds. Alternative investments are less widely traded and are often only offered through private transactions, making them relatively illiquid. The primary holders of alternative investments are institutions such as corporate and public pension plans, endowments, foundations and high net worth individuals. These entities can handle the lack of liquidity and are willing to sacrifice liquidity in order to earn a higher return over time. Hedge funds, real estate, timber, commodities (such as oil, gold and agriculture) and private equity are all common alternative investments.
Using the term Alternative Investments :
The Save a Squirrel Foundation recently hired an alternative investments portfolio manager to invest their acorns in some new hedge funds and private equity funds. The trustees thought it was best to have an expert oversee their foray into the complicated world of alternative investments.
Pay Special Attention To :
Investing in alternative investments is very complicated. It requires skill in financial analysis, investment strategy, legal matters (to review and understand the private contracts) and in the actual underlying investments themselves. Ensure you use an expert when reviewing opportunities in alternative investments so as to avoid any pitfalls (as there are many).
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Related terms
hedge fund , gold , illiquid
