The lower returns that traditional investments such as bonds and savings accounts bring to an investor’s portfolio can be a concern, especially in a low-interest-rate environment. These investments are often included in financial planning for their stability and predictable income, but their low returns can be a drawback. For these reasons, an alternative strategies fund can be a valuable investment vehicle. Let’s understand why.
Over time, high-net-worth (HNW) individuals have found that alternative and private assets are just as beneficial—if not more due to their potential higher returns—for their portfolios than public stock-traded ones. However, one must still remember that alternative assets come with higher risks and lower liquidity.
As a former sophisticated and generally inaccessible niche aimed at institutional or ultra-wealthy investors, the alternative space has now lowered its barriers, allowing accredited investors to tap into unique market opportunities.
There is a vast untapped market for alternative investments among HNW individuals, which is easier to explore with the help of portfolio managers and investment platforms, facilitating access to these investments with smaller minimum investments and operational support.
Not only that but the demand and growth that alternative strategies funds are seeing, mostly due to an increasing need for diversification and better returns, has positioned the private markets’ assets under management (AUM) at $11.7 trillion, with an annual growth rate of nearly 20 percent.
In this blog, we aim to provide a general overview of alternative strategies, the unique opportunities you might find in an alternative strategies fund, and why WebStreet’s alternative strategies funds are such an attractive option for accredited investors looking for the ideal passive income source.
What Are Alternative Strategies?
Alternative strategies refer to nontraditional methods of investing that differ from conventional investments. These strategies hold traditional and nontraditional financial assets, but they are managed using nontraditional methods.
The idea of alternative strategies is to enhance returns and manage risks in ways that can differ from more traditional investment methods. By targeting specific risk-return characteristics, there’s a higher possibility of generating a different pattern of risk and return. This way, you can make profits even when traditional markets or securities are declining in value.
Let’s take a look at some examples of alternative strategies used by portfolio managers for further understanding:
- Long/Short Equity: This strategy involves taking substantial positions in long and short stocks, ETFs, and related derivatives. The objective is to profit from the appreciation of stocks held long and the depreciation of stocks sold short. By doing this, investors can benefit from stock gains in their long positions and stock price declines in their short positions. This dual approach helps to manage risk and capitalize on market opportunities in both directions.
- Long/Short Credit: This approach seeks to profit from changes in the creditworthiness of individual bond issuers and specific segments of the credit market, normally represented by credit indexes. Typically, portfolios in this strategy buy bonds or sell credit-default swaps when expecting improved credit conditions (narrowing credit spreads). Conversely, they sell bonds or buy credit-default swaps to profit from the deteriorating credit of the underlying issuer (widening credit spreads). This strategy leverages shifts in credit conditions to generate returns.
- Market Neutral: The overexposure to public sectors can augment the investment’s risk. To diminish this, market-neutral strategies balance long and short positions across various exposures: sectors, market-cap ranges, investment styles, currencies, and countries. By matching short positions against long positions within each area, this strategy can help you achieve returns that are independent of overall market movements. They are often managed to be beta-neutral (insensitive to market movements), dollar-neutral (equal amounts in long and short positions), or sector-neutral (balanced within sectors).
- Buy-Grow-Sell: This strategy involves acquiring promising businesses, such as start-ups or e-commerce websites, scaling them through value-enhancing measures, and then selling them at a profit. While it is particularly prevalent in the private equity sector, it is not exclusive to it and can be applied to various business models, including traditional ones. This model involves deep operational engagement to unlock value and drive growth, capitalizing on the scalability and profitability inherent in online business models. It offers investors a compelling value proposition in the alternative investment space.
- Managed Futures: This strategy primarily involves trading in highly liquid global futures, options, swaps, and foreign exchange contracts listed on exchanges and over the counter. Managed futures strategies typically follow trend-following or price-momentum strategies, aiming to capitalize on market trends and price movements. They are designed to profit from market directions and volatility across different asset classes.
- Volatility: Volatility strategies see volatility as a trading distinct asset class. Directional volatility strategies seek to profit from trends in the implied volatility embedded in derivatives that reference other asset classes. For example, they might speculate on the future volatility of stocks, bonds or commodities. On the other hand, the arbitrage of volatility seeks to profit from discrepancies in implied volatility between related securities, exploiting differences in market expectations of future volatility.
- Macro: Macro strategies are based on broad economic trends and their impact on various markets, including equities, fixed income, currencies, and commodities. Managers using this strategy employ a variety of techniques, including discretionary and systematic analysis, combining top-down (macro) and bottom-up (micro) investment theses. These approaches can be both quantitative and fundamental, and they may involve both short-term and long-term holding periods, depending on the economic forecasts and market conditions.
- Multi-alternative: This strategy offers investors exposure to various alternative investment tactics within a single fund. By allocating most of their assets to various alternative strategies, these funds provide a diversified approach to alternative investing. This diversification helps spread the risk and potentially enhance returns by leveraging multiple investment techniques and asset classes.
Overall, we can say that an alternative investment fund is popular among sophisticated investors seeking higher returns by taking on higher risks. The objectives of these investments can vary: some funds specialize in one asset type, while others aim to mitigate risks by diversifying across various alternative asset classes.
The selection should be aligned with individual investment objectives. By allowing exposure to a broader range of assets and strategies, alternative investment funds help diversify portfolio asset allocation and performance, potentially reducing the overall volatility associated with traditional stock market investments.
Visit our insights page to learn more about how to diversify your portfolio with online businesses, or follow along as we acquire them, manage them, and then sell them.
How WebStreet’s Alternative Investment Funds Works
WebStreet is a pioneering platform that offers accredited investors the chance to invest in the lucrative online business world through alternative investment funds. With a proven track record of delivering over 20% annualized IRR and a 13.1% cash yield, WebStreet offers a clear, easy-to-understand option on the crowded landscape of alternative investments.
The platform uses the above-mentioned alternative strategy of buy-grow-sell. It meticulously selects portfolio managers who are experts in identifying promising online business assets with significant growth potential. These portfolio managers then work to scale these businesses, enhancing their value before selling them.
This model not only drives high cash flow returns but also ensures that investments are managed by portfolio managers with a vested interest in success, as they receive no salary and only receive profits when the online business makes profits as well.
The platform acts as a bridge between accredited investors looking to diversify their portfolios to mitigate risks and achieve higher cash-flow returns and seasoned portfolio managers handling the day-to-day operations within an alternative strategies fund.
Alternative investments have grown, with a demand for global alternative assets adding more than $8 trillion to assets under management in the next four years, expected to reach $24.5 trillion.
These numbers show good reason to say that alternative investments are gaining popularity among investors every day. WebStreet, aligning with this trend, designed a fund for those looking to invest beyond traditional assets, and do so passively.
“The problem with online business investing is that it takes a lot of time and effort, and it’s not passive at all. But if you can turn it into a passive investment, now we’re talking.”, said Stefan von Imhof, the CEO and Co-Founder of Alts.co, who’s now also a WebStreet investor.
But how does it work?
- Explore the current fund: Investors start their journey on WebStreet’s platform, an intuitive first glance where they can explore different diversified funds. Each fund is managed by a portfolio manager with proven expertise in identifying, acquiring, and growing online business assets.
- Accreditation and Account Setup: To comply with regulatory standards, WebStreet requires investors to be accredited. Setting up an account on the platform is very straightforward and prepares investors for their initial investment.
- Investment and Legal Documentation: Investors review and sign legal documents outlining the investment terms once accredited. WebStreet ensures this process is clear and concise, diminishing administrative burdens and maintaining high compliance standards.
- Fund Transfer: Investors transfer their funds to the chosen investment. WebStreet provides detailed instructions and makes sure that the investor sees a secure and efficient allocation.
- Fractional Ownership Model: WebStreet uses an online business fractional ownership model, which allows multiple individuals to own these high-valued assets collectively. Upon successful fund transfer, investors gain fractional ownership of the businesses within their chosen fund. This structure allows them to benefit from the performance of a diversified portfolio.
- Quarterly Distributions: Probably one of the most attractive aspects of WebStreet’s platform is the receipt of quarterly distributions. These represent your share of the profits generated by the portfolio businesses, providing a steady passive income stream. WebStreet delivers strong cash yields translated into tangible returns on your investment.
- Regular Updates and Reporting: The platform and investors communicate openly and transparently. The last ones receive quarterly updates with detailed insights into the fund’s performance, portfolio managers’ strategies, and the overall health of the invested businesses. These reports are prepared by third-party accounting firms and reviewed by WebStreet.
- Diversification and Security: WebStreet’s commitment to diversification reduces risk by spreading investments across various business models. This approach shields you from the downfall of any of these assets, ensuring that your financial objectives are not limited or affected by their under-performance.
Invest in WebStreet‘s Alternative Strategies Fund
With 40 assets acquired, $27M raised, and a projected IRR of over 20%, WebStreet’s track record of success is undeniable. With our unique alternative strategies fund process, we’ve turned online business investing into an accessible route to accredited investor success.
You can enjoy a straightforward, transparent, easy-to-access new venture to earn passive income while generating great returns. With the help of vetted professional portfolio managers, you can tap into online business opportunities and be part of the fund you find yourself more aligned with.
There’s a unique blend here: high returns, professional management, and passive income. This is a rare opportunity for tech-savvy entrepreneurs seeking to diversify their investments without the hassle of daily oversight.
WebStreet helps you leverage this buy-grow-sell alternative strategy and feel confident about your managed investments to finally achieve the financial success you were looking for while focusing on what you do best—leading your personal entrepreneurial ventures.
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 insights.
