Increased portfolio diversification for affluent investors

Exposure to investments that are not directly correlated to the standard capital market is a sound strategy for increasing portfolio diversification. Alternative investments offer qualified investors improved portfolio diversification.

Diversification is the golden rule of investing. Carefully allocating assets to account for financial personality, risk tolerance and time horizons is a critical part of a thorough financial plan. For most, a spread of traditional investments, such as stocks and bonds, is a suitable approach. However, more affluent investors should also consider additional strategies to further broaden their portfolios, reduce overall portfolio volatility, and increase long-term portfolio performance through a variety of market conditions.

Typical examples of some of the investment opportunities in this class include:

  • Hedge funds
  • Funds of funds
  • Managed futures
  • Private equity and venture capital
  • Real estate

A study showed that the wealth managers with in excess of $1 billion allocate more than half into alternative investment structures. Institutional portfolios use a variety of alternative investment strategies focused on the potential benefits of better managing portfolio risk and enhancing long-term returns. It must be noted that these portfolios generally enjoy longer time horizons than do most individual investors, allowing for a greater consideration of less-liquid investment strategies. Consequently, for private investors, we would not typically consider such a high concentration in alternative investments.

Investment opportunities for high net worth investors
The In Group’s 
team of professionals analyse and select what they believe are high-quality, non-traditional investments for higher net worth clients. Through due diligence and constant monitoring of investments covering a broad scope of asset classes, the relevant divisions of The In Group (Invest, Inproperty, Intrust, Insure etc) can then determine the most appropriate alternative strategies for qualified investors to enhance their overall asset allocations adding value to their investment portfolios.

Risk warning

  • Alternative investments may not be suitable for all clients
  • It is important to note that the capital value of, and income from, any investment may go down as well as up and you may not get back the full amount invested
  • Investors in alternative investments should bear in mind that these products can be highly speculative and may not be suitable for all clients
  • Investors should ensure they understand the features of the products, fund strategies and the risks involved before deciding whether or not to invest in such products
  • Such investments are generally intended for experienced and financially sophisticated investors, who are willing to bear the risks associated with such investments, which can include: loss of all or a substantial portion of the investment; lack of liquidity in that there may be no secondary market for the fund and none may be expected to develop; volatility of returns; prohibitions and/or material restrictions on transferring interests in the fund; absence of information regarding valuations and pricing; delays in tax reporting; key man and adviser risk; limited or no transparency to underlying investments; limited or no regulatory oversight; and less regulation and higher fees than mutual funds

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