A Guide to Your Alternative Investment Strategy

NEW YORK, NY / ACCESSWIRE / March 4, 2024 / Alternative investments - basically assets other than stocks and bonds - are increasingly popular. Private-market asset classes such as those offered by investment platform Yieldstreet offer access to unique opportunities to generate passive income.

While no investment is risk-free, alternatives including art and real estate can offer tax advantages and protect against inflation. They can also potentially improve returns. Alternatives also serve another crucial purpose - diversification. Constructing a portfolio of varying asset types and expected performances can mitigate overall risk.

Here is a guide to creating an alternative investment strategy.

Look for Alternatives to Fixed Income

To help shield against economic and stock market volatility, hedge fund strategies are key among alternative investment trends. Because such funds have low correlation to public markets, they can potentially offset portfolio losses in stocks. Owing in part to the $1 trillion U.S. infrastructure deal, green energy and infrastructure could be promising areas for investment.

Explore Secondaries

In terms of the best alternative investments, the private secondary market continues to grow. It permits investors to purchase an existing asset or interest from primary investors, and sell it. A primary private equity fund, for example, might buy a stake in a private business, and subsequently sell it to a secondary purchaser. The case for secondaries is helped by stock market volatility and a more anemic rate of private-deal exit activity.

Consider Private Credit

Private credit can potentially help bolster income and overall returns. It includes a number of strategies involving investing in corporate debt. Due to the floating-rate characteristic of most direct loans, direct lending, in particular, can help shield against increasing interest rates. A form of financing, direct lending occurs when a nonbank lends to companies. Asset-based strategies can also offer investors exposure to a diversified pool of assets.

Factor in Healthcare Innovation

Spurred by technological and biological advances, the healthcare sector is disrupting business models. It is a trend that promotes a number of alternative strategies. In private equity, for example, investors may seek out managers whose focus is late-stage companies that can produce solid returns. Private real estate approaches that prioritize life sciences or medical office properties are prime possibilities.

Keep an Eye on Over-Leveraged Companies

Partly due to easy access to financing, business default rates have been relatively subdued in recent years. However, inflation and rising interest rates could begin to pressure over-extended companies. That could create an environment in which the credit market is dislocated, and some corporations begin to experience distress. Investors can potentially capitalize by acquiring stakes in these companies at discount. They can then turn them around with the aim of ultimately generating a profit.

Private-market offerings are on the rise as investors seek refuge from the constant volatility of public markets. After all, the market has outperformed stocks in each economic downturn nearly in the last two decades. Alternative investments can provide portfolio diversification, which is a fundamental element of long-term investing success.

Contact Information

Seba Koshy
Account Manager
seba@mashmarketing.digital

SOURCE: Yieldstreet

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