Looking for a reliable way to increase your yields? Discover Benzinga’s favorite alternative investment funds.
Depending on who you listen to, the recent free fall in the stock market could be just the start of a lasting downturn in the economy. Some predict a long and difficult recession. It is not difficult to understand why. Inflation is at record highs in the United States and Europe. There is a war in Ukraine, which is a major grain supplier for much of the world.
At times like these, many investors head to Wall Street’s exit doors and start looking for alternative investments. However, if you are not someone with special knowledge or expertise, it can be difficult to choose the right alternative investment. That’s why your best bet might be an alternative investment fund.
What are alternative investments?
Alternative investments are classified as investment opportunities outside of stocks and bonds. Here are examples of popular alternative investments:
Alternative investment funds to consider
Alternative investment funds are diversified sets of investments in one or more alternative investments. Fund content is usually vetted and selected by a seasoned fund manager who has a strong track record of generating profits for investors. However, they are not guaranteed to make money.
Therefore, before investing in a fund, you should consider the risks and your investment objectives very carefully. Below is a short list of some popular alternative investment funds. Each of them will have its own advantages and disadvantages.
Hedonova Mutual Fund
The Hedonova Mutual Fund is a bit like an upscale Las Vegas buffet. It is a highly diversified mix of a number of different alternative investments. The logic behind the Hedonova fund is that by spreading risk across a wide range of alternative investments, the fund maximizes investors’ profit potential while minimizing the risk of putting all your money in one basket.
Investments included in the Hedonova fund include:
- Non-fungible tokens (NFT)
The minimum investment for Hedonova is $5,000, and it currently has an average internal rate of return (IRR) of 38.7% and outperforms the SP 500 by 15%. This fund also has no minimum holding period or liquidation fees should you wish to divest. This is a good place to start your search for an alternative investment fund.
Crowdstreet C-Reit I
Real estate is perhaps the most venerable and respected alternative investment. Not only does it provide investors with the opportunity to generate passive income, but real estate also creates additional profit potential through the appreciation of the asset itself. This is why so many institutional investors prefer real estate investment trusts (REITs).
Crowdstreet’s C-REIT I is such a fund. The Crowdstreet platform is a highly respected online real estate investment platform. He offers individual sponsor investments, but his C-REIT is an offering of their own making. It comprises a group of 20-25 properties hand-selected by Crowdsteet’s investment team, all of whom are accomplished property professionals.
The C-REIT is only available to accredited investors, but it accepts self-directed IRA contributions. The minimum investment is $25,000 and there is a 5-7 year holding period. The C-REIT provides for an IRR of 15% and offers quarterly distributions. Investors may also benefit from tax advantages, including income tax write-offs and reductions on distributions.
RealtyMogul Income REIT
RealtyMogul is another real estate investment platform that allows investors to fund carefully selected real estate deals. Like Crowdstreet, it also has its own REIT. The RealtyMogul Income REIT is designed to generate passive income for investors while providing them with the tax advantages of real estate ownership.
The non-traded REIT has a minimum investment of $5,000 and consists of a diverse mix of different income-generating properties. The total property value of the fund is approximately $345 million and it has been open to investors for nearly six years. During this period, the Income REIT paid investors between 6% and 8% of net profits (not including fees).
To date, that means income REIT investors have earned nearly $22,000,000. The fund also pays investors a monthly income. So if you’re looking for passive income, this can be a good place to start.
RealtyMogul Growth REIT
Realty Mogul has another REIT offering known as Growth REIT. This fund is more focused on generating returns for investors through real estate appreciation, although it generates passive income. However, Growth REIT investors will see most of their dividends when the assets in the portfolio are sold at the end of the holding period.
This fund has a minimum investment of $5,000 and includes multi-family apartment communities in some of the strongest and most recession-resistant real estate markets in the United States. The total asset value of the fund is $258 million. The pro forma provides for an annual net distribution of 4.5%, which is paid on a quarterly basis.
So far, the fund has made these quarterly distributions for 17 consecutive quarters and distributed a total of $7.6 million in profits to investors. If you are looking for a slow and stable fund that has a larger long-term payout, this one is worth considering.
Yieldstreet Prism Fund
yield street is an online investment platform that offers a unique alternative known as Prism Fund. Much like the Hedonova mutual fund, the Yieldstreet Prism fund is built around a diverse mix of different investments that are carefully chosen by the Yieldstreet brain trust. A brief summary of the investments included in Yieldstreet’s Prism Fund appears below:
- Private credit
Each asset in the fund has its own expected return and overall the fund targets an 8% distribution to investors. Another thing investors will like about the Prism Fund is a minimum investment of just $500, which is much lower than many of its competitors. The Prism Fund currently has $110 million in assets under management.
While the returns aren’t as robust as some other funds, the low buy and diversified nature of the Prism Fund makes it a very investor-friendly package. This is especially true for people new to alternative funds.
Choose your hedge fund carefully
Historically, alternative investments have been popular because they have proven resilience to outside factors such as stock market performance. This quality is particularly true for funds that deal with real estate. Everyone needs a place to live and work, which means real estate will continue to generate money even if the stock market crashes.
However, alternative investing involves risk, like all investments. The best hedge funds try to mitigate this risk through diversification, but that’s no guarantee of profits, and hedge markets also have down cycles. Consult a financial adviser and consider your investment objectives carefully before entering into an offer.
The hedge funds highlighted in this article represent a small picture of the offerings available, and their appearance here is not a recommendation as to the viability of any individual fund. Do your due diligence and don’t invest more than you can afford to lose. But if you’re looking for respite from a falling stock market, some of these deals might be right for you.