The Rise of Alternatives as an Asset Class: Expanding Investment Horizons

In the ever-evolving landscape of investment opportunities, traditional asset classes are no longer the sole focus for investors seeking to diversify their portfolios and generate robust returns. Enter the rise of alternatives as an asset class, a phenomenon that is revolutionizing the investment industry.

Gone are the days when stocks, bonds, and real estate dominated the investment landscape. Today, savvy investors are exploring a wide range of alternative assets, including private equity, venture capital, cryptocurrency, art, collectibles, and more. 

This blog delves into the captivating world of alternatives as an asset class, shedding light on why they have gained immense popularity in recent years.

Let’s begin!

Why Alternative Investments Are Popular in 2023?

In 2023, alternative investments have gained significant popularity among investors, driven by compelling figures and statistics that highlight their potential for higher returns and diversification benefits. Let's delve into the numbers that showcase why alternative investments are capturing the attention of investors:

  1. Impressive Returns: 

Alternative investments have consistently delivered robust returns. In 2023, private equity funds recorded average annual returns of around 15% to 20%, outperforming traditional asset classes. Venture capital investments have seen significant success, with total global funding reaching a staggering $368 billion in 2023.

  1. Diversification Potential: 

Investors recognize the importance of diversifying their portfolios. In 2023, the global market for alternative investments is estimated to exceed $14 trillion, offering a vast range of options beyond stocks and bonds. Real estate, a popular alternative asset, has seen remarkable growth, with the global market value reaching $9.6 trillion in 2023.

  1. Technological Advancements: 

Technology has revolutionized the accessibility of alternative investments. Crowdfunding platforms and online investment portals have made it easier for individual investors to participate. The global crowdfunding market is projected to surpass $400 billion in 2023, providing ample opportunities for individuals to invest in alternative assets.

  1. Rising Interest in Digital Assets: 

The popularity of digital assets, such as cryptocurrencies, has soared in 2023. The total market capitalization of cryptocurrencies has exceeded $2.5 trillion, with Bitcoin leading the way. The rapid growth and potential for substantial gains in the digital asset space have attracted investors seeking alternative investment opportunities.

  1. Institutional Allocations: 

Institutions have increasingly embraced alternative investments. Pension funds, endowments, and sovereign wealth funds have allocated a significant portion of their portfolios to alternative assets. In 2023, institutional investors' allocation to alternative investments is projected to surpass $13 trillion, further solidifying their popularity.

The figures and statistics for 2023 highlight the attractiveness of alternative investments, showcasing their potential for higher returns, diversification benefits, and institutional support. 

Structured Debts in 2023: Solid Alternative Investments

In 2023, the investment landscape witnessed a rising trend of structured debts, particularly those backed by real estate. This alternative investment avenue has gained significant traction due to its attractive returns and the stability offered by tangible assets. 

Let's explore the figures and statistics that highlight the growing popularity of structured debts backed by real estate:

  1. Increased Allocation: 

Institutional investors, including pension funds and insurance companies, have ramped up their allocation to structured debts backed by real estate. In 2023, institutional investments in real estate debt are estimated to exceed $300 billion, reflecting a substantial increase compared to previous years.

  1. Yield Potential: 

Structured debts backed by real estate have proven to be an attractive option for investors seeking steady income streams. These investments offer attractive yields, with average annual returns ranging from 18% to 22% in 2023.

  1. Market Size: 

The global market for real estate debt investments is projected to surpass $1.5 trillion in 2023. This growth is driven by the increasing demand for income-generating assets and the favorable risk-return profile of structured debts backed by real estate.

  1. Risk Mitigation: 

Investors appreciate the relatively lower risk associated with structured debts backed by real estate compared to other forms of debt instruments. The underlying collateral of real estate assets provides a cushion against default risks, enhancing the security of these investments.

  1. Diversification Benefits: 

Structured debts backed by real estate offer diversification benefits to investors' portfolios. The ability to invest in a range of real estate projects, such as residential, commercial, and mixed-use properties, allows investors to spread their risk across various sectors and geographies.

Popular Alternative Investments in 2023

In 2023, several alternative investments have gained popularity among investors, offering unique opportunities outside of traditional asset classes. 

Let's explore a few of the popular alternative investments in 2023:

  1. Cryptocurrencies: Digital assets like Bitcoin and Ethereum have captured significant attention in 2023. The total market capitalization of cryptocurrencies has surged to over $2.5 trillion, attracting both individual and institutional investors seeking high-growth potential.
  2. Private Equity: Private equity investments continue to be sought after in 2023. With an average annual return of upto 15%, private equity provides investors access to non-publicly traded companies, offering potential for substantial capital appreciation.
  3. Sustainable Investments: The focus on sustainable and socially responsible investing has grown significantly in 2023. Investors are seeking opportunities in renewable energy, clean technology, and environmentally conscious sectors, aligning their investments with their values.

These popular alternative investments in 2023 demonstrate investors' inclination towards high-growth digital assets, private equity, and sustainable investment opportunities.

To Summarise

2023 has witnessed a significant rise in the popularity of alternative investments, driven by the quest for higher returns, diversification, and aligning investments with personal values. Cryptocurrencies, private equity, real estate crowdfunding, and sustainable investments have emerged as sought-after avenues for investors looking beyond traditional asset classes.

Assetmonk's structured debts backed by real estate have gained notable recognition. With their carefully curated investment opportunities, Assetmonk offers investors a chance to participate in the thriving real estate market while mitigating risks through structured debt instruments. These investments provide a unique combination of stable returns, collateralized by tangible assets, and the potential for long-term growth.

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Q1.What are alternative investments? 

Alternative investments refer to investment options outside of traditional asset classes like stocks and bonds. These can include private equity, hedge funds, real estate, commodities, cryptocurrencies, and more.

Q2.Why are alternative investments popular in 2023? 

Alternative investments have gained popularity in 2023 due to their potential for higher returns, diversification benefits, and the pursuit of non-traditional investment opportunities. Investors are seeking to explore new avenues for growth and minimize the risks associated with traditional investments.

Q3.Are alternative investments suitable for all investors? 

Alternative investments may not be suitable for all investors as they often involve higher risks and require a deeper understanding of the specific asset class. It's important to assess your risk tolerance, investment goals, and seek professional advice before considering alternative investments.

Q4.How can I invest in alternative assets? 

Investing in alternative assets can be done through various channels, such as crowdfunding platforms, private investment firms, or specialized funds. Conduct thorough research, understand the investment terms and risks, and choose a reliable platform or advisor to guide you through the process.

Q5.What are the advantages of diversifying into alternative investments? 

Diversifying into alternative investments can help reduce portfolio risk by spreading investments across different asset classes that may have a low correlation with traditional markets. It can potentially enhance returns and provide exposure to unique investment opportunities not available in traditional markets.