Investing in Alternative Assets

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What are alternative assets?

‘Alternative assets’ are generally investments in assets that are not shares in listed companies or a fixed income security. This broad description of ‘alternative assets’, therefore includes tangible investments such as precious metals, fine wine, and property, and some financial assets such as venture capital, funds and trusts.

As a source of growth, ‘alternatives’ are becoming more mainstream as investors seek out better returns on investment in the current low interest rate global economy. With careful management, alternative assets can be used to diversify and strengthen portfolio performance, as they tend to perform better than traditional assets in the long term without the volatility and risk associated with financial markets.

Fine wine also falls into a group of tangible assets termed ‘Passion Assets’. These are generally viewed as luxury investments and include classic cars, art, vintage watches, coins and stamps, chinese ceramics and antique furniture. Barclays Wealth and property investment specialist, Knight Frank both publish research on investment performance in these assets.

Source: Knight Frank Luxury Investment Index 2017

Market Liquidity

Not only is fine wine one of the top performing alternative assets, it is also the most ‘liquid’. With Liv-ex acting as an equivalent stock exchange, the fine wine market enjoys a greater transparency on trading prices than nearly all of the comparative alternative assets. This benefits the investor at acquisition in terms of price comparisons and paying a ‘fair price’ and at exit due to the active trading dynamics driven by an established trading market supported by Liv-ex and other internet-based platforms.

“You need to balance your investments as well as possible and in general terms adding alternatives that are uncorrelated is something you should do at all times, but especially if you are less certain about the markets.” – Willem van Dommelen, Head of multi-asset systematic strategies at NN Investment Partners

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