Alternative Assets and How to Invest in them with Hedonova
Alternative investments are not very well-known outside the circle of sophisticated investors.
But they are very powerful investment options to diversify a traditional portfolio of stocks and bonds.
Let’s first understand what alternative assets are and then look at them in detail.
What are alternative investments?
All assets except the traditional stocks, bonds and cash are alternative investments.
Some examples of alternative investments are startup equity, cryptocurrencies, NFTs, P2P lending, art, wine and finance litigation. The ocean of alternative investments is only bound by one’s imagination and knowledge.
88% of high net worth individuals have exposure to alternative assets in addition to their traditional portfolio of stocks and bonds. These are the most sophisticated investors with the best advisors. So, there is definitely some advantage of investing in alternative assets.
Why should you invest in alternative assets?
While there are many reasons to invest in alternative assets, they all come under two categories –
- Superior performance
Alternative assets have historically beaten high-performing equity indices like the S&P 500. Adding a high return asset to your portfolio is always a good idea!
Artwork, a popular alternative asset, has comfortably beaten the S&P 500 in the last 25-30 years.
Other alternative assets such as real estate data centers, cryptocurrencies like bitcoin have beaten the returns generated by S&P 500.
However, it is important to note that there is no free lunch in investing. To generate these abnormally high returns and superior performance, investors in most alternative assets would have had to bear a lot of volatility in their investments.
Therefore, alternative assets should be used in investment portfolios along with traditional assets. When mixed rightly, both the asset types can create the perfect diversification.
- Portfolio diversification
A couple of paragraphs earlier we mentioned that there is no free lunch in investing. However, Nobel Laureate Harry Markowitz disagrees with us.
Markowitz pioneered the idea of portfolio diversification, which is the cornerstone of portfolio management. It is called Modern Portfolio Theory.
He said that a portfolio of multiple assets can match or outperform a portfolio consisting of just one asset with lower risk. He famously referred to diversification as the only free lunch in investing.
However, mindless diversification can do more bad to your portfolio than good. Thankfully, mixing a portfolio of traditional and alternative assets is an example of thoughtful and effective portfolio diversification.
How to invest in alternative assets?
Sadly, as an average investor on the street, it is nearly impossible to invest in a well-diversified portfolio of alternative assets.
The first constraint is the high prices of one unit of most alternative assets. An alternative asset like an NFT can cost as much as a few thousand dollars.
Another problem with most alternative assets is exclusivity. Even if you do have the money to buy a Da Vinci painting, you need to have the right contacts to be invited to an art auction.
You may be able to invest a little bit in a few alternative assets like cryptocurrencies here and there. But building a diversified portfolio of alternative assets all by yourself is very difficult.
But Hedonova, a Delaware-based hedge fund, has democratised alternative investing. They accept investments as low as $1000 to give you exposure to a well-diversified and professionally managed portfolio of alternative assets.
What is Hedonova?
Hedonova is a hedge fund that specialises in alternative asset investing.
When you hear the term ‘hedge fund’ it is natural to think that it is reserved only for the super-wealthy. But Hedonova is available to anyone globally who can spare $1000 dollars to invest alternative assets.
Hedonova opened its fund for outside investors in 2018 and manages assets worth around $80 million today. Since its inception, they have generated a return of 53% after fees thereby comfortably beating the S&P 500 index.
Hedonova has some of the best features for investors –
- Low ($1000) investment constraint – Hedonova has eliminated the high ticket size limitation that you see in alternative assets and other hedge funds
- Well-diversified – Think of Hedonova as an actively managed mutual fund of that gives your exposure to many alternative assets
- Professionally managed – Hedonova’s investment team has worked at some of the most reputed alternative and traditional assets funds in the past
- Anyone can invest – Hedonova is registered in Delware, USA but is open to anyone to invest in their alternative assets fund
- Easy taxation – For international investors, taxation is easy. Pay no taxes in the USA and pay capital gains tax as per your home country laws
- Quick redemption – Hedonova uses many liquidity measures so that investors can enter and exit easily from the fund without implications
You can find more information about Hedonova here.
How to invest in alternative assets through Hedonova?
Regulation requires at least one instance of contact between the investor (you) and a Hedonova team member. So, visit their website and leave your contact details.
A Hedonova team member will contact you and help you understand the investing process. You can also clear any other doubts you may have regarding the process.
Once you start investing, you can track your portfolio on the Hedonova website or app (soon to be launched). The investment team will keep you posted with all the fund level transactions and maintain full transparency.