8/3/2019 Alternative Investments Offer New Options for
Investors
1/3
Th e Central Ne w York Business Joumal August 3, 2Alternative
investments offer new options for investorBy Bryan M. PlaceI t
wasn' t all that long ago that aver-age investors only had
stocks,bonds, and mutual fluids as their onlyinvestment
altematives. The past several years, the invest-V I E W P O I N T "
" universe hasopened up and a
new heading called"alternative investments," which have
his-torically only been avaiiabie to an elitefew, have now become
available to nearlyeveiyone.What are altemative investments?
It'seasier to explain what they arenot, ratherthat what they are.
They are not your typi-cal stocks and bonds. Alternative
invest-ments can include non-traded real-estateinvestment trusts
(REITS), private equity,limited partnerships, long/short
funds,hedge funds, and managed futures.There are certain attributes
that thesealtcmative investments contain that canmake them
extremely attractive as a por-tion ofa fully diversified
portfolio.Pros Low correlation to other holdings Exposure to
institutional money-man-agement techniques Income generation can be
attractive Investment performance can potentiallyexceed that of
traditional investm entsCons Investment-management expenses canbe
high" Volatility of returns
Place
Loss of all, or asubstantial portion,of your investmentdu e to
short-selling,leveraging, and otherspeculative investmentpractices
Lack of liquidity orsecondary market Lack of reportingdu e on
valuations andpricing Less regulation High account minimumsLet's
take a look at each area to see howinvestors are utilizing each of
these invest-ments.Non-traded REITS: This asset classhas gained
tremendous traction over thepast five years and investors have
flockedto real estate. A REIT allows an investor topurchase a pool
of real-estate assets in oneprofessionally managed portfolio.
Investorspurchase the non-traded REiT at a set price,generaHy $
10/share and receive a dividendeither monthly orquarterly. Current
yieldsare in the 6 percent to 7 percent annualized
range and share prices do not fluctuate.The share price ismerely
an estimate of theportfolio value, and these investments dolack
liquidity. The goal ofmost non-tradedREITS is to eventually sell
the portfolio orlist the shares. Prior to that, the shares maylack
a secondary market and shares mayno t be transferable. These REITS
needto be clearly understood, but in a properportfolio can be
attractive as real estate
offers attractive diversification benefits formany portfolios, A
pmdcnt allocation deci-sion is to have no greater than 3 percent
to5 percent of total investment assets in thisasset class.Hedge
funds: This iscertainly the mostpopular find exciting investment in
thealtemative-investment universe, mostly be-cause of the perceived
exclusivity. Hedgefunds have historically been reserved forthe
high-net-worth market place, as invest-ment minimums often exceed
$1 million.This has recently changed, and a numberof funds have
begun to sprout up and ac-count minimums can be as low as
$25,000.Hedge funds are loosely regulated pri-vate-investment funds
that, unlike mutualfunds, have the ability to attempt to
capturegains by being both long and short in themarket as well as
in any style, sector, ormarket cap. Funds can oflen have highfees
of I percent to 2 percent, along withperformance bonuses equal to
20 percentof profit. The funds of^en employ leverage,which can
amplify both gains and losses.Losses canalso be catastrophic as
seen inMarin Capital Partners LP and Long TermCapital Management,
two recent hedgefunds that failed.
Hedge fluids are appropriate for diver-sification purposes, but
investors shouldavoid employing a large percentage of
theirinvestments to any one strategy.Private equity: This has
recently becom ethe investment du jour as private-equityassets have
risen, andsubstantial buy-outsof well-known publicly traded
companies
have taken place. Private equity is sia group of investors that
pt>ol capitalmanage private enterprises or take exipublic
companies private. Recent priequity acquisitions include HCA,
HToy-R-Us. Chrysler, and Neiman MaThis all sounds attractive and
excitinggaining exposure to private equity issomewhat exclusive and
the big plsuch as Bain Capital, Blackslonc Gand KKR have
substantial minimumsmake this anunattainable investment anative for
most investors.Pros
Potential to serve as a high-risk, return investment Lack of
correlation to stocksbondsCons High minimums Uncertain returns Risk
and portfolio considerations Potential for diminishing
returnsLimited partnerships (LPs): Tha somewhat broad heading, but
I waspecifically focus on LPs that offer tremdous tax savings as an
incentive to inThis includes oil and gas, low-inchousing, and lease
LPs. Newpartnerare coming to market daily, and their keting
material and sales pitch is notshort of impressive. When looking
uthe hotxi. however, the returns maysupport thepilch. These LPs can
genehave very high upfront andongoing
Se e INVESTMENTS, page
E x h i b it a t t h e O N L Y B u s in e s s S h o w t h a tB r
in g s S m a l l B u s in e s s O w n e rs to Y o u !
E x p a n d y o u r c o n t a c t s a n d d o B u s in e s s w i
t h t h eD e c is i o n - M a k e r s !O ctober 1 1, 200 7 9AM -
5PM
Convention Center at O ncenter Syracuse, NY
Be part of the Show!To Exh ibit regis teronline or
call622-2249
venzonverijonwlrelesspresents
Presented B y :
O th er S p o n s o r s ;Seaboardgraphics -jjMedia S p o n s o r
s :
vemon
CELEBRATING 10 YEARS!TH E S M A L L B U S IN E SS S H O WS O H
O
SYRACUSE2 0 0 7FO R S M A U O F F IC E /H O M E O F F I
Gwww.sohosyracuse .com
erf ?T E C H N O L O G I E S J^fJ. m^ TAF F L E A S I N QABLE E
A S L E
at&t
li n iiwii^V III ' I III
8/3/2019 Alternative Investments Offer New Options for
Investors
2/3
8 Th e Central New York Business Joumal August 3, 20INVESTIVIE I
ITS ! The key to looking at any altemative investment is to
understand th e four major asp Continued from page 6laek a
seeondary market (ability to sell toother investors if needed), and
thereforelack liquidity. The oil and gas LPs havehad a tremendous
run with the high price ofoil. Tliese partnerships can offer
attractivereturns, especially when accounting for thetax benefits.
There are a number of playersin this space, and investors are best
servedto stick with those with an established trackrecord.
Managed futures: Have you alwayswanted to miike money in
orange-juiceftitures or pork bellies? Well here's your
chance. Managed futures are most easilyaccessed through a
niulti-manager platformwhere the managers employ a technicaltrading
platform and have access to anumber of futures markets. These
maritetscan include metals, stock indices, curren-cies,
agricultural commodities, and energy.Futures can be an attractive
allocation deci-sion in a fully diversified portfolio becausethey
aetually have a negative correlation tostocks. However, as with
previous altema-tive investments discussed, track record,fees, and
liquidity are important aspects ofany program, and futures should
probablynot exceed 3 percent to 5 percent ofa fully
diversified portfolio.Traditional investments with an alter-
native twist: There are several mutual-fundcompanies that now
offer funds tliat areboth long and short in the market,
includingfunds utilizing leverage, which can amplifygains as well
as loses. The use of lever-age and short selling are especially
riskystrategies as short-selling (betting a stockor sector will
tall in value) losses could po-tentially be unlimited, because
stocks canrise forever and compound losses. The useof these
strategies should only be employedby the sawiest of investors and
should onlybe utilized as a hedging strategy.
Demonst ra t ionsWanted: W orld-c lass dem os of Upstatet
lewjotk 's technology - from lab to marke t
fuse2007 is Upstate NewYork's premier business and
techconference to be held in Syracuse, NY October 9-10.We are
seeking the best and brightest examples of Upstatetechnology, from
lab to market. If your company, researchlab or university group
hasa tech demo, we are interestedin hearing from you!Visit
www.fuse2007.com for details and application.Though we will
consider ALL technology areas, this year'sconference wil l feature
developments and demos in thefollowing areas:
Nanotechnology Healthcare DefenseTechnologies Communications
& Internet Green Energy & EnvironmentalTechnologies
October 9-10, 2007Accelerating BusinessGrowth in Upstate New
YorkGet connected at www.fuse2007.com
n s o r e d bU SA .Chambe BUSINESS JOURNA L3B CLEARCHANNEL
AMO
' f ^ T I M E W A R N E R C A B L EV THt l>bwtl Of VOU
nationaigrici ' ^ ' ^ / i ^ * ^ ' ! ! >}communigration
TECHNOLOGIES
The altemative-investment universecertainly vast, and for the
most part, sexclusive, but as you can see. the barriare beginning
to fall. The key with ainvestor looking at these alternative
invements is to understand four major aspec
1) How does the fee structure work?2) What are the investment's
liquid
characteristics?3) What are the investment's risks a
volatility?4) How does it fit into my portfolio?If those
questions can be answered
your satisfaction, then perhaps the invement is appropriate for
your portfolio. Wany investment, these positions do requfollow-up
and ongoing due diligence; ulike the popular infomercial you can't
j"set it and forget it." Bryan M. Place. CFP. w the presidentPlace
Financial Aih'isors (w-ww.placenancial.com}. a fee-based
financial-planing and asset-management firm basedManiius.
J o b - s e a r c h t i m e f a l lin s e c o n d q u a r te rBy
Journal Staff
Job seekers can expect to spend letime searching and more
timworking, according to the ChallengJob Market Index conducted by
Internatioal outplacement consuhing firm ChallengGray &
Christmas. Inc.
Individuals seeking work landed jo17 percent faster between
April and Juthan in the first quarter of 2007. The seartime for job
seekers 50 or older decreasdramatically, dropping almost 32 percein
the second quarter, according to tIndex, a quarterly survey
eomprised of tresponses of 3,000 job seekers across tnation.
During the second quarter, the averasearch time before winning a
job wasmonths, dov 0.6 months from the preceing quarter. For job
seekers 50 and oldthe search time decreased from 4.5 montto 3.1
months.
CEO of Chicago-based ChallengGray & Christmas. John A.
Challengsays, "Skilled workers of any age are in dmand right now,
but the ones in the highedemand are those who can hit the
grourunning with little or no training and begcontributing
immediately to the bottoline. Individuals wilh 20 to 30 years
experience under their belts are obviousin the best position to do
this."
According to the federal Bureau Labor Statistics, there is an
obvious dmand increase for older workers with moexperience. From
June 2005 to June 200employment for workers 50 lo 54 increasby
almost 1 million, and for workers 55 64 , it climbed nearly 1.7
million,
Although job seekers are experiencia decrease in job-search
time, there donot seem to be a decline in job quality, acording to
the survey. More than 90 perce(92.5) of respondents reported
acquirijob positions that were either of equal better quality, up
neariy 2 percent from tprevious quarter, according lo the
Index.
