Alternative Investments: A Short 2020 Guide

Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice. 

Many British people will be familiar with the “mainstream” investments of cash, bonds and company stocks. Alternative investments, however, tend to fall outside of these concepts and include “physical” assets such as commodities (e.g. art), as well as “digital” assets such as cryptocurrency. Yet how do alternative investments work, exactly, and what benefits can they offer the investor outside of investments on the likes of the London Stock Exchange (LSE)?

In this short guide, our investment team here at Bure Valley Group will be sharing some answers to these important questions. If you’d like to browse our alternative investment opportunities (e.g. property loan notes) after reading this guide, then please see our portfolio page. For business owners seeking funding, you can reach us via:

+44 160 334 0827

 [email protected]

 

Alternative investment hallmarks

What are some of the features which distinguish alternative investments from bonds, cash and stocks? One difference would be that they tend to not be directly affected by stock market volatility, although this also tends to characterise bonds and cash. Alternative investments, as such, can be used to help diversify a portfolio away from reliance on stocks, and help to shield it from short-term market fluctuations.

However, other important features of alternative investments include less data regarding their historical investment performance (e.g. over many decades), and also lower liquidity. For these reasons, it’s often important to conduct extra due diligence and research on the viability of a specific alternative investment before committing to it. 

However, the chance of attaining some very strong returns in particular cases can often make this effort well worthwhile. Consider, for instance, that the value of fine wines increased by 20% in the 12 months preceding July 2017. Moreover, collectables such as postage stamps, comic books and phonograph records have also witnessed strong returns in past years.

 

What about property?

Is property considered a “mainstream” investment or an alternative investment? Given the high numbers of British people who own their own home, and who also consider this to be one of their biggest investments, many people might characterise property as the former. However, one should note that property investments can take different forms, such as investing in commercial real estate or in property loan notes. The latter is a particularly compelling investment opportunity which we love to offer our investor network, here at Bure Valley Group. Indeed, property loan notes – when properly vetted – can give investors a risk-mitigated investment opportunity in property development, with the potential for very attractive returns.

One thing to bear in mind with property investments, however, is that the market is not immune to the stock market’s movements. Indeed, the property market is widely regarded as cyclical, and there may be times when an investor’s property portfolio declines in value with lowering house prices. However, here property loan notes can offer a lot of protection to the investor, since they involve the lending of money to property developers (a bit like a “bond”). Moreover, the investor’s capital can enjoy a high degree of protection by choosing “asset-backed” deals. 

 

Equity & angel investing

Angel investing has grown in public familiarity in the past twenty years or so, particularly due to influential TV programmes such as Dragon’s Den. There are also many investment platforms now available on the market which help angel investors connect with exciting alternative investment opportunities (i.e. Bure Valley Group is one of them).

As an angel investor, you gain access to a range of exciting investments which are not open to the general public. It is a riskier approach to investing, but the return on offer can be far higher compared to mainstream investments. The Nesta Report, for instance, shows that angel investors in the early stages can earn 22% IRO each year, over the course of a decade.

 

Managing risk

As mentioned, alternative investments can be riskier than bonds, cash and stock investments. Many believe that they are too illiquid and lacking in transparency to justifiably feature within an investor’s portfolio. However, there is evidence to suggest that including them strategically can lead to stronger investment returns. One approach to consider is to incorporate alternative investments which provide strong returns uncorrelated to the stock markets. In the event of a downturn, therefore, this can help add further diversification to your portfolio and shield it during the harder times.

It’s important to note, however, that the complexity and opacity of many alternative investments can lead to investors getting taken advantage of, by brokers who exploit investors’ lack of understanding. One good rule is to ensure you are careful to only invest in those alternative investment opportunities which you understand. Also, consider doing some due diligence on the different investment platforms and brokers out there on the market, to ensure you give yourself the best chance of getting presented with viable, vetted investment projects/opportunities.

 

Invitation

If you are a successful investor looking for EIS opportunities, or if you are a business owner looking for funding, then we’d love to hear from you. Get in touch today to start a conversation with our team, and discuss some of the great investment memorandums we have available:

+44 160 334 0827

 [email protected]