Sophisticated investors often diversify their portfolios beyond stocks and bonds – the main reason for the diversification is to spread risk and increase the odds of profit from different classes of assets. The diversified portfolio will have a mix of conservative and speculation investments. Hence, you can expect accredited investors to include mix of alternative investments such as student housing, binary options, farmland, wines, arts, and vintage cars among others in their portfolio.
However, investors are gearing up for massive changes in the global economic landscape because of the brewing changes in the geopolitical scene. The Brexit vote, Italy's "No" vote, a potential 'Frexit' and president Trump are some of the factors that could trigger political and economic uncertainty globally. This article seeks to provide insight into some major trends that investors should expect from alternative investments in 2017.
However, investors are gearing up for massive changes in the global economic landscape because of the brewing changes in the geopolitical scene. The Brexit vote, Italy's "No" vote, a potential 'Frexit' and president Trump are some of the factors that could trigger political and economic uncertainty globally. This article seeks to provide insight into some major trends that investors should expect from alternative investments in 2017.
Investors will have more reasons to embrace alternative investments
The first trend to expect in the investment landscape this year is that investors will have more reasons to embrace alternative investments. To start with, the U.S. economic landscape already has pent-up volatility that could break out once Trump starts implementing some of his proposed economic policies. British Prime Minister, Theresa May has detailed her plan for a clean hard Brexit. The populist voice to take France out of the Euro is also causing shock wakes to ripple through the EU.
Interestingly, alternative investments such as gold tend to have an inverse relationship with traditional investments such as stocks. Hence, an increase in volatility and uncertainty in the equity markets could push investors to seek stability in the safe haven that gold provides.
Alternative investments also help to hedge against risk from traditional assets. For instance, you can use options to hedge against volatility in equities, forex, and commodities; hence, investors will have more reasons to fortify their portfolio with alternative assets in order to hedge risks.
Watch out for more market disruption as technology plays a bigger role
Fintech is already causing massive disruptions in the global financial services industry as tech startups continue to build products to reduce the need for traditional financial institutions. Technology is providing an enabling environment for alternative investments in cryptocurrency such as Bitcoin and blockchain technology.
We can also expect an increased adoption of peer-to-peer lending systems and crowdfunding platforms making it easier for funds to flow into alternative investments. In 2017, technology will play a larger role in the alternative investment market by making it easier for investors to access valuable information on conducting due diligence, buying, or selling alternative investments. Digital technology will also make it easier to integrate platforms for alternative investments with social media in order to propel social investing to the limelight.
Interestingly, alternative investments such as gold tend to have an inverse relationship with traditional investments such as stocks. Hence, an increase in volatility and uncertainty in the equity markets could push investors to seek stability in the safe haven that gold provides.
Alternative investments also help to hedge against risk from traditional assets. For instance, you can use options to hedge against volatility in equities, forex, and commodities; hence, investors will have more reasons to fortify their portfolio with alternative assets in order to hedge risks.
Watch out for more market disruption as technology plays a bigger role
Fintech is already causing massive disruptions in the global financial services industry as tech startups continue to build products to reduce the need for traditional financial institutions. Technology is providing an enabling environment for alternative investments in cryptocurrency such as Bitcoin and blockchain technology.
We can also expect an increased adoption of peer-to-peer lending systems and crowdfunding platforms making it easier for funds to flow into alternative investments. In 2017, technology will play a larger role in the alternative investment market by making it easier for investors to access valuable information on conducting due diligence, buying, or selling alternative investments. Digital technology will also make it easier to integrate platforms for alternative investments with social media in order to propel social investing to the limelight.
Many investors will hand their money over to hedge funds
Many investors will hand their money over to hedge funds in 2017 against the backdrop of increased volatility in conservative investments and a more pressing need to diversify their portfolio with alternative investments. For one, many investors will find the activities associated with investing in and keeping track of a fully diversified portfolio tiring. Hence, they'll be more open to the idea of having an hedge fund manage their portfolio.
However, it won’t be business as usual for hedge funds in 2017. In 2016, hedge funds faced massive headwinds as many institutional investors reduced their exposure to hedge funds. The largest hedge funds won't necessarily have the biggest share of the market because investors will be looking for the nimblest funds that can make proactive decision in line with current economic realities.
Hence, investors will be more open to the idea of trusting mid-sized and small hedge funds with their portfolio this year. Investors will be looking for fund managers with the best products for helping retail investors get exposure to alternative currencies without putting the stability of the portfolio at risk.
However, it won’t be business as usual for hedge funds in 2017. In 2016, hedge funds faced massive headwinds as many institutional investors reduced their exposure to hedge funds. The largest hedge funds won't necessarily have the biggest share of the market because investors will be looking for the nimblest funds that can make proactive decision in line with current economic realities.
Hence, investors will be more open to the idea of trusting mid-sized and small hedge funds with their portfolio this year. Investors will be looking for fund managers with the best products for helping retail investors get exposure to alternative currencies without putting the stability of the portfolio at risk.
