Top 5 Alternative Asset Classes To Invest In

What comes to your mind when you think of investing?

Most people think of investing in traditional modes of security like stocks, bonds, mutual funds, and the like. However, in recent years, we’ve seen a new league of investors who have been actively investing in alternative investment funds to earn high returns in a short time span.

With the increasing volatility of the market, alternative investment has been the talk of the town, and for all the right reasons.

The Growth Of Alternative Asset Class

Over the past two years, the worldwide alternative investment industry swelled up to ~US$10 trillion. What makes alternative investment funds a lucrative deal for investors is the numbers showcased on SEBI’s website. Cumulative funds raised as of June 2018 was Rs 74,892 crore – an increase of over Rs 26,003 crore raised since June 2016. 

The rapid growth of alternative investment funds was accelerated by the fall of the Indian stock market, which witnessed a reduction in investments from foreign investors in the backdrop of a $2 billion banking fraud. Additionally, 2018 was subject to a flat Nifty/Sensex, and the IL&FS crisis hit the debt and equity markets.

These financial mishaps shackled investor’s trust and accelerated demands to include a broader range of asset classes to reduce risk and volatility, and hedge against inflation.

So, as we turn the page from 2018 to 2019, you must be wondering where to vouch for your money to generate the most out of your investment. Here are the five alternative asset classes that are worth investing in 2019.

Peer-to-Peer Lending

Peer-to-peer lending is a new investing phenomenon that has caught the attention of investors. Also known as P2P lending, this mode of investing services offers loans for businesses, personal use, and more.

Since there is no bank involved in P2P lending, your money is pooled with other investor’s cash, and together you can loan out to the individual or business asking for funds. As an investor, you will receive a fixed repayment every month that incorporates the interest owed.

Of late, several P2P lending companies have cropped up in the market that’ll help you diversify your portfolio.

Gold

Gold is India’s favourite asset class. The reason why Indians prefer investing in gold is that it seldom reacts to market fluctuation.

The tangible inflation hedge is often considered a sought-after asset class and can be a strong competitor to stocks. Its low correlation with other asset classes has regarded gold as an excellent diversifier.

There are several ways to gain exposure to gold, such as purchasing and holding physical gold, like coins or bars, gold trade exchanged assets (ETFs), gold bonds, and more.

Real Estate

If you are planning to put your money outside the stock market, then think of investing in real estate.

Unlike the conventional mode of investments, real estate is a tangible investment option. However, while investing in real estate, an investor must remember that it is a long-term investment, and hence, it should be a well-thought decision.

Alternative Investment Funds

Investors with high returns appetite can consider alternative investment funds.

Given its unique features and higher potential for alpha creation over other product offerings have put alternative investment funds on the top radar of many investors.

In the past few years, alternative investment funds have grown manifolds, thanks to the government’s proactive regulatory measures. Alternative Investment Funds, whose regulations were formulated over five years ago, soared to a USD 25 billion industry with more than 500 funds.

Exchange-Traded Funds (ETF)

Exchange-traded funds track indices. Also known as ETFs, this asset class is more like stocks and is based on an arbitrage mechanism formed to keep it trading near its Net Asset Value.

As compared to other modes of investment, ETFs are a better option in terms of investing in large-cap space. 

Conclusion

In any phase of the economic cycle, discipline is fundamental in constructing a strong portfolio, but positioning and tactics must advance as the market shifts. As alternative assets increase, investors must move to an application of greater discipline—more science, less craftsmanship—in their fund allocation choices. 

Especially in today’s world, where liquidity turns out to be all the more valuable, risk and correlation growing to be a constant pain point, information and control can considerably create a remarkable effect – alternative asset investors will profit from a robust framework. KredX’s invoice discounting platform provides a unique opportunity for investors to invest in a brand new asset class while maximising yield in a short time span.  Presented below is the IRR comparison of KredX with Nifty50 and Kotak Liquid from 01 April 2019 to 17 June 2019.