Alternative Investment Funds

Petko Bahovski

In this chapter we look at alternative funds. These funds usually invest in alternative assets, assets that would not be found in standardised investment portfolios. Due to their unconventional nature, their valuation may be difficult at times and they are in general less liquid than traditional funds.

Examples of alternative assets are hedge funds, venture capital firms, private-equity firms and commodity investments. The definition of an alternative asset class can be quite broad and even include things such as art, fine wines, sports cars and other luxury collectibles. For the purpose of this book, we are going to look at alternative funds that can be a supplemental part of an investment portfolio and should be considered within the context of a longer investment horizon.

We start with real-estate funds and REITs – or real-estate investment trusts. These funds may invest directly in companies or in securities of companies that are predominantly engaged in the real-estate industry. They are usually far more liquid than direct property ownership, and they tend to give you a bigger industry and geographical diversification. Real-estate funds may be attractive not only for