The Role of Alternative Investments
What are Alternative Investments?
The term “alternative investments” covers a range of investments that fall outside of traditional investments such as stocks, bonds, cash/cash equivalents, or mutual funds that invest in those asset classes. Alternative investments include hedge funds, managed futures, private equity, private debt (business development companies) and real estate (real estate investment trusts).
Alternative investments historically have sought to provide investors with several potential investment advantages, including diversification and risk reduction.Changing financial markets demand an allocation strategy that incorporates more than just stocks, bonds and cash.
Alternative investments were once available exclusively to institutional investors, and carry certain restrictions including investment minimums and eligibility requirements, which may exclude their practical use by individual investors. However, thanks to financial innovation and the growth of the alternative strategy marketplace, a growing number of alternative strategies are becoming available to individual investors like you.