Demystifying Alternative Investments

Alternative finance is often used as a catch-all investment phrase. Likewise, the blanket term “alternative investments” encompasses so many different types of investment opportunities that many investors are left confused. An alternative investment is any type of investment that falls outside conventional investment tactics like stocks, bonds, and cash. They include real estate, commodities, jewelry, wine, art, and asset-based investments and can be a valuable addition to nearly any investment portfolio. However, there are a few misconceptions about alternatives.

Liquidity Risk

Many traditional hedge funds that offer alternative portfolios lock investors’ funds in 15 year windows, meaning that investors won’t see their money for a long time. These highly illiquid opportunities are meant for investors who are certain that they won’t need their money for an extended period of time. While long investment windows may still be the case for some alternative asset classes, investment opportunities with shorter investment terms do exist. What dictates investment windows often lies in the asset type. For example, investing in REITs often requires a 5-10 year investment window to allow for sharp market fluctuations in the portfolio while still returning high long-term returns. Short term returns on commercial REIT structures can be lackluster, at best, for various market reasons including length of ownership, interest rate fluctuations, lending policy changes and more. Arthena offers investors the sweet spot of alternative asset investing services. Our funds return 15% yoy over the course of a five year timeframe. We utilize proprietary, cutting edge data analytics alongside Arthena’s Index to identify and continually monitor the best investments in the art market available in any auction season.

Are They Really Just for the Ultra Wealthy?

It used to be true that alternative investments were an “elite” asset class, restricted primarily to hedge funds and other high earning investors. Recent legislation has opened up access to alternatives for individual investors. The 2012 JOBS act allowed many platforms, like Arthena, to offer these types of investments to accredited investors. Access to these opportunities is being democratized, with lower minimums and shorter investment durations. What makes Arthena unique is that we were the first to provide direct, diversified investing in the $60 billion art market. We provide all investor types with direct access to the art market, across multiple funds and across several risk tolerance profiles in order to deliver high returns in a short term structure. There’s a reason UHNWIs invests in art assets and now those same diversified returns are available to you.

Alternative Investments Are Complex

Some alternative investment opportunities have complex structures and require significant financial expertise to manage successfully. There are, however, other alternative asset classes, like asset-based lending, that can be easier to understand. One type of asset-based lending investment opportunity is real estate, which offers an easy-to-understand structure of being secured by tangible collateral in the case of a default. Performance of such an opportunity can be measured by the timeliness of monthly payments. Much like the way REITs function in the market, art backed assets and fund structures can deliver high, market uncorrelated returns by introducing tangible, real assets in the form of recognizable art works. Much of the same theory and financial logic is applied to this model, and by applying Arthena’s proprietary index methodology, we target the highest growth opportunities in any given year.

They Have an Unproven Track Record

While alternative investments have been a hot commodity and a strong investment trend in most recent years, investment opportunities outside of the stock market have existed for decades. For example, hedge funds have been around since the 1940’s, with their peak growth in the 1980’s. Alternative investment opportunities outside of hedge funds such as private equity, managed futures, real estate, and asset-based lending, are all asset classes with lengthy history and established performance indicators. Arthena works with asset managers who have a proven track record in their respective fields and have performed through credit cycles. We also offer our funds directly to accredited investors seeking portfolio diversification regardless of their interest in the art markets. Arthena does this for you by intelligently selecting the highest growth performer in each class and actively managing funds.

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