What are Alternative Investments? Meaning
Alternative Investments is an umbrella term that refers to all asset classes other than the traditional (conventional) ones, being Stocks, Bonds, and Cash. They include Hedge Funds, Private Equity, Commodity, Real Estate, Infrastructure, Structured Products, and others (like Antiques and Collectibles). They can be tangible (e.g., real estate, metals, antiques) or intangible (e.g., hedge funds, derivatives, copyrights).
Most alternative investment assets are held by institutional investors and accredited, high-net-worth individuals due to their complex nature, lack of regulation, and degree of risk.
Managers of alternative investments portfolios often use non-traditional, complex strategies such as the use of leverage and derivatives, short selling, and investment in illiquid assets. Managers make use of the market inefficiencies to find arbitrage opportunities (see Efficient Market Hypothesis).
The main objective of using alternative invest
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