Alternative investment
[2] The term is a relatively loose one and includes tangible assets such as precious metals,[3] collectibles (art,[4] wine, antiques, vintage cars, coins, watches, musical instruments, or stamps[5]) and some financial assets such as real estate, commodities, private equity, distressed securities, hedge funds, exchange funds, carbon credits,[6] venture capital, film production,[7] financial derivatives, cryptocurrencies, non-fungible tokens, and Tax Receivable Agreements.
In recent years, the growth of alternative finance has opened up new avenues to investing in alternatives such as the following: In a 1986 paper, William Baumol used the repeat sale method and compared prices of 500 paintings sold over 410 years before concluding that the average real annual return on art was 0.55%.
[11] Another study of high-quality oil paintings sold in Sweden between 1985 and 2016 determined the average return to be 0.6% annually.
Equity crowdfunding platforms have seen a significant amount of success in the UK and, with the passing of JOBS Act Title III in early 2016, are now picking up steam in the United States.
Through these platforms, investors can have fractional ownership of a particular asset leased to an organization and earn fixed returns.
[17] Venture capital consists of private investments made into young start-up companies in exchange for equity.
For the purposes of the report, alternative investments included "structured products, luxury valuables and collectibles, hedge funds, managed futures, and precious metals".
[22] Other notable alternative asset managers include Apollo, Brookfield, KKR, and Carlyle, each of which have hundreds of billions in AUM.
[22] As of 2023, traditional asset management companies had begun to offer alternatives including BlackRock, T. Rowe Price, and Franklin Templeton Investments.
[27] One of the world's largest hedge fund managers, AQR Capital, began offering funds in 2009,[28] and grew from $33 billion in assets under management (AUM) in 2010 to $185 billion in AUM in 2017 driven in part by marketing mutual-fund like products with lower fees.
