How Portfolio Managers Can Thrive With Alternative Investments

Alternative investments are financial assets that diverge from the traditional investment categories of stocks, bonds, and cash. In recent decades, they have become a pivotal opportunity for investors and portfolio managers aiming to diversify their portfolios and enhance returns. While alternative investments offer unique advantages, they also come with distinct risks and considerations.

The total value of alternative assets is on an upward trajectory, with some analyses predicting that it could reach approximately $21.1 trillion by 2025. Similarly, assets under management by investment firms are anticipated to grow substantially. It’s important to note, however, that such projections are inherently uncertain and depend on a wide array of factors, including economic conditions, market trends, and regulatory changes. Thus, these figures should be considered indicative of the growing interest in alternative investments rather than fixed forecasts.

Today’s alternative investment landscape is diverse, encompassing assets like online businesses, private equity, venture capital, hedge funds, art, antiques, managed futures, derivatives contracts, commodities, cryptocurrencies, collectibles, and real estate. This diversity allows for significant portfolio customization and diversification.

Advantages and Challenges of Alternative Investments

One of the primary appeals of alternative investments is their potential to offer portfolio diversification and higher risk-adjusted returns. By incorporating assets that have low correlation with traditional markets, investors can potentially reduce volatility and improve overall portfolio performance. However, it’s crucial to recognize that alternative investments also come with challenges such as liquidity constraints, complex valuation methods, and in some cases, higher fee structures compared to traditional investments.

Regarding transaction costs and minimum investment requirements, it’s true that some alternative investments might exhibit lower transaction costs due to reduced turnover. Yet, this is not a universal rule. The costs and investment thresholds vary significantly across different alternative asset classes and specific investment vehicles. Therefore, investors should carefully consider these aspects when incorporating alternative investments into their portfolios.

Strategic Considerations for Portfolio Managers

Portfolio managers, whether managing their own portfolios or those of clients, face the challenge of selecting the right mix of assets to meet investment objectives. This process involves a detailed market analysis, understanding each alternative investment’s unique attributes, and assessing their potential role in achieving desired portfolio outcomes. 

The complexity and heterogeneity of alternative assets necessitate a rigorous and strategic approach to portfolio construction.

Portfolio managers must have a deep understanding of current market conditions and a keen eye for identifying alternative assets that demonstrate resilience and growth potential. They must also stay informed about global economic trends, regulatory changes, and technological advancements that could impact alternative investment markets.

As the investment landscape evolves, alternative investments represent a dynamic component of modern portfolio strategies. While they promise diversification and enhanced returns, they also require a sophisticated approach to risk assessment, market analysis, and strategic planning. 

In the following section, we will analyze different alternative assets and see how they have performed in the past couple of years. This will outline a roadmap for portfolio managers to optimize their investment strategies in the evolving landscape.

An Analysis of the Best Alternative Assets in the Market

The allure of alternative assets lies in their ability to hedge against market volatility, inflation, and potential for significant capital appreciation. Delving into the specifics of these alternative assets highlights their unique characteristics and market dynamics.

The variety of alternative investments available gives investors a broad choice beyond the traditional asset classes. Here’s an overview of some of the best alternative assets in the market:

• Online Businesses

Investing in online businesses is a unique and lucrative alternative investment opportunity, offering high-growth potential and direct engagement with the digital economy’s forefront. Online sectors like e-commerce, digital services, content, and affiliate sites have grown substantially over the past decade. In 2023, global retail e-commerce sales reached an estimated $5.8 trillion, up from $1.3 trillion in 2014, estimated to reach $8 trillion by 2027.

• Private Equity

Private Equities (PE) have been attractive for investors looking for alternative investments. It involves investing in venture capital for startups or buyouts from established companies not publicly traded on a stock exchange. 

PE has more than $4.4 trillion in assets under management, including $1 trillion of uninvested capital. Investors in private equity aim to achieve substantial returns on their investment by actively engaging in the management of the companies and enhancing their value over time. 

Data from Cambridge Associates shows that private equity investments have historically outperformed public equity by a significant margin, solidifying their reputation for delivering superior returns. This performance advantage of private equity is not just against public equities but extends across other asset classes.

Moreover, the performance disparity between quartiles within the private equity sector underscores the importance of carefully selecting the right fund. Between 2007-2017, the top quartile return for private equity was more than any other asset class by 7%. This variance highlights the potential for exceptional returns when choosing the right fund.

Private equity’s ability to offer similar returns to Emerging Market Equities and surpass all other traditional asset classes, coupled with its relatively low volatility, presents a compelling risk-return profile for investors.

• Real Estate

Real estate investment stands out for its dual potential: the prospect of capital appreciation over time and generating income through rent. Investors can buy commercial and residential properties through direct purchases, crowdfunding, mutual funds, and Real Estate Investment Trusts (REITs). 

The real estate market in the US is expected to reach $119.80 trillion in 2024. Despite the requirement of substantial upfront capital and liquidity challenges, real estate is a compelling choice for investors who want to balance their portfolios with assets that can weather economic fluctuations and offer steady returns over time. 

• Commodities

Investment in commodities involves trading physical goods like precious metals, oil, and agricultural products that play essential roles in the global economy. Investors use channels like futures contracts and exchange-traded funds to gain exposure to the price movements of these items. 

The value of the commodities market worldwide is estimated to reach $131,300 billion in 2024 and $139,300 billion by 2028. Though commodities markets are volatile due to several factors, such as weather, geopolitical tensions, and changes in supply and demand, they have several advantages to safeguard against inflation and currency devaluation.

• Collectibles

 Investing in collectibles involves trading fine art, antiques, vintage liquor, and classic vehicles. The collectibles market is growing at an average Compound Annual Growth Rate (CAGR) of 6.2% and is estimated to reach $1 trillion by 2033. For many investors, investing in collectibles is a passion project that serves the dual purposes of financial speculation and personal fulfillment.

The investors aim to sell these assets when their value grows over time. This market operates with minimal regulation and tends to be less liquid, making it crucial for investors to conduct thorough research on the items’ intrinsic and historical value. 

• Cryptocurrencies

Cryptocurrencies like Bitcoin, Ethereum, and Dogecoin have introduced investors to the revolutionary technology of blockchain. Cryptocurrencies are growing in popularity despite their high volatility and lack of regulations.

In August 2023, crypto’s worldwide market capitalization was estimated at $1.09 trillion. It’s a niche for investors drawn to the prospects of navigating the dynamic and uncharted territories of virtual investment. It provides a great avenue for investors with a penchant for high-risk, high-reward ventures and a keen interest in digitally evaluating money.

One of the fundamental problems with cryptocurrency is that it is an incredibly volatile investment. This is because it isn’t intrinsically valuable. Therefore, its market value is based entirely on speculation without anything intrinsically valuable backing it up. Investing in something speculative is a guaranteed way to introduce volatility into your portfolio.

• Peer-to-peer lending

P2P lending involves giving direct loans to individuals or businesses via online platforms connecting borrowers and investors. It is similar to the traditional bond market in its function, but it operates within more private domains, often engaging with a riskier clientele. The global P2P lending market size is growing at a CAGR of 29.1% from 2022 to 2030 and is expected to reach $804.2 billion by 2030. 

Investors are attracted to the prospect of achieving high returns by directly contributing to the financial needs of others, bypassing lending institutions and traditional banking.

Challenges and Trends Affecting Alternative Investments

While exploring the array of alternative investments, it is crucial to recognize that the financial environment is in constant flux. These alternative asset classes may offer unique opportunities for substantial returns but are not immune to the broader challenges and trends shaping the global economy. Below are some challenges and trends shaping the investment strategies and outcomes in various alternative investments. 

Online Businesses:

• Use of AI Online businesses will increasingly use AI to create more personalized customer experiences. It will also significantly automate sales copy, enhance customer service, and deliver product recommendations based on customers’ behaviors, locations, and demographics.
• Data security concerns: With the increasing reliance on cloud-based services, SaaS businesses face the challenge of managing large volumes of data while adhering to regulatory standards and ensuring data security. They must bring transparency in data handling, invest in cybersecurity measures, and comply with data protection laws to build and maintain customer trust.

Private Equity:

• Compressed returns: High competition for assets, driven by significant amounts of dry powder, compresses expected returns.
• High valuations: Surplus capital and other factors have forced valuations up, making it harder to find attractive investment opportunities.
• Operational complexity: The trend toward considering more operating assets requires deep operational expertise and active management.

Real Estate:

• Technological disruption: Changes in how we work and live, driven by new technology and emerging lifestyle choices, could render many real assets obsolete while creating opportunities elsewhere.
• Market entry by tech giants: The entry of companies like Google, Microsoft, Facebook, and Amazon into the real estate market disrupts traditional investment strategies.
• Growth despite challenges: Real estate is likely to see substantial asset growth under management, though investors must navigate the complexities of changing consumer preferences and technological impacts.

As we explore the frontier of alternative investments, WebStreet stands out for its unique approach, combining the best of online business investing and private equity. It allows accredited investors to benefit from the digital economy’s rapid growth and strategic depth of private equity.

WebStreet also serves as a bridge, connecting investors with seasoned portfolio managers who specialize in curating portfolios of established online businesses. This unique arrangement allows investors to use the expertise of professionals adept at identifying and managing high-growth digital assets.

Ready to Elevate Your Investment Portfolio? Dive into the world of online business investment with WebStreet. With our platform, you gain access to a diversified portfolio of alternative investment assets managed by experts to ensure you enjoy passive income, lower risks, and potentially high returns.

Why Investors Are Choosing WebStreet as Their Alternative Investment Platform

WebStreet is an alternative investment platform that connects accredited investors with established online business portfolio managers offering a unique blend of opportunity, convenience, and potential for high returns up to 20% in annual IRR. It solves many of the common investor dilemmas such as lack of time, expertise, and desire to manage active investments.

WebStreet ensures investors can confidently invest in online businesses as alternative investments by meticulously selecting funds based on track records, acquisition criteria, and portfolio managers’ recommendations. Investors are investing with WebStreet for several reasons, as WebStreet facilitates investments and redefines what it means to invest in the digital age.

Why Investors Choose WebStreet As Their Alternative Investment Platform

• Passive Investment: WebStreet offers a completely hands-off experience for investors with minimal active involvement in the operations and management of online businesses.
• Quarterly Distributions and Reports: It ensures transparency and regular income potential with quarterly distributions and detailed reports on your digital assets’ performance.
• Expert Portfolio Managers: Investors enjoy the satisfaction of their funds being managed by experienced portfolio managers with proven track records.
• Diverse Investment Options: WebStreet diversifies investments into alternative assets across the digital sector, like SaaS, e-commerce, and content marketing.
• Lower Risk: The diversification of funds reduces the risk of a major loss if any asset doesn’t perform well, making it a safer, more balanced approach to investing in high-growth digital assets.

Along with investors, WebStreet offers numerous benefits to the portfolio managers who are the backbone of the platform’s success. These skilled professionals understand the complexities of online business investments. They find a supportive and innovative environment in WebStreet that recognizes and rewards their expertise. 

WebStreet ensures portfolio managers have the resources, freedom, and incentive to excel in their portfolios. WebStreet provides portfolio managers access to a curated pool of accredited investors and a structure encouraging strategic investment and asset growth. It is a whole ecosystem where portfolio managers can thrive.

Why Portfolio Managers Should Choose WebStreet to Thrive With Alternative Investments

• 4.7x Leverage on Your Money and 23% of Portfolio Profits: WebStreet enables portfolio managers to leverage their investment by up to 4.7 times the original amount and also offers 23% of the profits from their portfolio, which significantly enhances the potential for higher earnings and rewards for successful investment strategies.

• Access to Accredited Investors: WebStreet connects portfolio managers to a broad network of accredited investors. This ensures a steady stream of capital, opening doors to new projects and growth opportunities that might otherwise be out of reach.
• Control on Investment: Portfolio managers at WebStreet retain considerable control over their investment strategies. WebStreet also relies on portfolio managers’ recommendations for acquiring online businesses. This allows portfolio managers to apply their expertise directly to digital assets under their management, which empowers them to execute their plan for asset growth.
• Performance-Based Compensation: WebStreet’s compensation model is based entirely on performance. This ensures that the interests of portfolio managers align with those of their investors. This structure incentivizes portfolio managers to achieve the highest possible returns as it would directly impact their earnings.
• “Skin in the Game” Commitment: Portfolio managers must invest 5% of the total capital into their managed funds. This ensures that the managers are personally invested in the success of the asset.
• Operational Support and Resources: WebStreet offers comprehensive support and resources to portfolio managers, including due diligence, asset acquisition assistance, operational oversight, and legal assistance. WebStreet brings on third-party advisors to help with acquisitions, operations, or any other activity as needed to maximize returns. This ensures that the managers stay focused on their core responsibilities instead of being bogged down by administrative tasks.
• Robust Vetting Process: WebStreet follows a rigorous vetting process for selecting portfolio managers to ensure quality and reliability for investors. Being chosen as a WebStreet portfolio manager is a mark of excellence and trust, enhancing the manager’s reputation in the investment community.

Investors and portfolio managers are gravitating towards WebStreet as the platform of their choice for thriving with alternative investments. WebStreet embodies the future of incorporating alternative investment into your portfolio, a strategic move to diversify and safeguard your financial future.

WebStreet has uniquely positioned itself by offering investment opportunities in high-growth online businesses and private equity. It simplifies access to these lucrative markets and empowers investors with expert portfolio management for high returns, portfolio diversification, and minimized risks. 

WebStreet offers a promising pathway to achieving your financial goals as the alternative investment landscape grows. Whether you are an experienced investor looking to diversify your portfolio or a portfolio manager looking to use your expertise in the digital economy, WebStreet can help you excel and secure your financial future.

Why You Should Consider Adding Alternative Investments to Your Portfolio

Alternative investments offer investors and portfolio managers a pathway to diversification. Investing in these avenues is a strategic approach to safeguarding and enhancing portfolios against market volatility and inflation. Apart from these, there are several reasons why investors, as well as portfolio managers should add alternative assets to their portfolios that we will discuss below.

• No correlation with traditional Market Movements: Alternative investments like online businesses, private equity, and real estate are less sensitive to market movements. This is because these asset classes have little correlation to the stock market, enhancing portfolio stability in fluctuating economic conditions.
• Diversification: Many alternative assets are known as diversifiers. Diversification helps reduce volatility without cutting back on profits. Moreover, it mitigates losses and improves risk-adjusted returns.
• High Return Potential: Alternative assets have the possibility of delivering significantly higher returns compared to conventional investments. Some alternative investments can generate as much as 50-100% returns. This makes them an enticing prospect for boosting your portfolio’s overall performance. However, such potential returns are not free of the associated risks and are not guaranteed.
• Safeguard Against Inflation: Alternative investments, especially online businesses, real estate, precious metals, cryptocurrencies, and so on, protect your assets from the declining purchasing power of money. For instance, in January 2009, one ounce of gold was worth $910. Its value increased over the years, and it was sold for $2,067 in January 2024.
• Tax Benefits: Some alternative sectors qualify for beneficial tax treatments like grants, deductions, and other incentives. Tax benefits like that can increase the net returns of these investments.
• Regulator Flexibility: Unlike heavily regulated stock and bond markets, alternative investments are subject to fewer regulations. While specific real estate and hedge fund aspects undergo significant regulatory scrutiny, it’s still less regulated than traditional securities. This lack of red tape paves the path for greater flexibility in investment decisions and portfolio management, allowing investors to explore new opportunities.

Alternative assets hold a unique position in the modern investment portfolio, offering numerous benefits compared to traditional investments. They are great avenues for investors to protect and grow their wealth in today’s uncertain economic landscape.

For investors and portfolio managers, alternative investments are attractive for their potential for financial gain and strategic advantages. These investment avenues present a spectrum of possibilities to enhance portfolio performance with passive income potential, high-growth opportunities, and inflation protection.

Incorporating alternative investments into your portfolio is the key to achieving a well-rounded, resilient investment strategy. WebStreet is at the forefront of alternative investment opportunities in online businesses. It offers portfolio managers and investors a platform to access, manage, and thrive in online businesses.

With the opportunities offered by WebStreet, portfolio managers can diversify their portfolios and position themselves for long-term success in the ever-changing financial marketplace.

Click Here To Start Your Journey With WebStreet Today. Unlock the door to diversified, alternative investments and learn more about investing in online businesses by reading our blog.