Alternative investment

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A British 1 shilling embossed stamp, typical of the type included in an investment portfolio of stamps.

An alternative investment is an investment product other than the traditional investments of stocks, bonds, cash, or real estate. The term is a relatively loose one and includes tangible assets such as precious metals,[1] art, wine, antiques, coins, or stamps[2] and some financial assets such as commodities, private equity, hedge funds, carbon credits,[3] venture capital, forests/timber,[4][5][6] film production[7] and financial derivatives.

Contents

Research

There is a wide variety of literature on alternative investments; however, this term has been used broadly and can also be used to refer to financial alternatives such as derivatives or other alternatives such as energy. It is difficult to find research on the investment characteristics of tangible alternatives such as art or wine due primarily to a lack of good quality data. The Goizueta Business School at Emory University has established the Emory Center for Alternative Investments to provide research and a forum for discussion regarding private equity, hedge fund, and venture capital investments.

Investors

The Merrill Lynch/Cap Gemini Ernst & Young World Wealth Report 2003, based on 2002 data, showed high net worth individuals, as defined in the report, to have 10% of their financial assets in alternative investments. For the purposes of the report, alternative investments included "structured products, luxury valuables and collectibles, hedge funds, managed futures, and precious metals".[8] By 2007, this had reduced to 9%.[9] No recommendations were made in either report about the amount of money investors should place in alternative investments.

Characteristics

Alternative investments are sometimes used as a tool to reduce overall investment risk through diversification.

Some of the characteristics of alternative investments may include:

See also

References

Further reading