Updated: 14th January 2020
An alternative investment fund (AIF) is a collective investment in so-called ‘non-standard’ tangible and non-tangible assets whereby investors’ capital is pooled, and the returns are also pooled.
When investors place their money into products that don’t fall under the ‘mainstream’ label of stock, bonds, and cash, an opportunity may lie within the alternative investment market.
High risk investing for professional investors
AIFs carry a greater degree of risk than conventional investment funds, but they’re attractive to some investors due to the potential for greater reward – typically professional investors or high net worth individuals.
Other benefits of investing in AIFs include flexibility in comparison with mainstream investment funds. Julie Palmer, RBR Advisory partner, takes a look at some of the common characteristics of alternative investment funds and the potential benefits and drawbacks for investors.
Common features of alternative investment funds
Alternative investment funds can include tangible assets such as wine, watches, and fine art, but also intangible assets such as hedge funds and private equity. Low liquidity is a feature of many alternative investments, and there’s typically little connection between ‘traditional’ investment products and alternative investment funds.
High fees and significant initial investment requirements are also characteristic of AIFs. Concerns about transparency and lack of information have been voiced in the past, and accurately valuing alternative investment funds has also been an issue.
What type of assets might be included in an alternative investment fund?
An alternative investment fund might include:
- Precious metals
- Fine wine
- Fine art
- Venture capital
- Hedge funds
- Private equity