What is an Alternative Investment Fund?

Alternative investing sees you put your money into a fund focused on something that little bit different.

You might help a start-up grow, invest in the technology of the future or put your money into a personal, lifelong passion, like art or wine.

Here we introduce alternative investment funds.

What is an alternative investment fund?

An alternative investment fund is an investment vehicle that does not focus on mainstream investment assets, like bonds, cash and stocks. Instead, an alternative investment fund typically focuses on:

  • Private equity – capital not listed on a stock exchange
  • Hedge funds – pooled funds designed to invest in specific market opportunities
  • Commercial property – offices, business parks, shops
  • Commoditiesgold, oil, copper, coffee
  • Derivatives – an agreement between parties where value is determined by an underlying security, index or asset, such as interest rates and commodities
  • Managed futures – an investment into assets, such as currencies and energy, that is determined by expected future profit
  • Assets – coins, antiques, art

Alternative investment funds raise money from investors then put that money into an agreed asset class.

The overall aim is to achieve good financial return for those investors.

What is the Alternative Investment Market?

You may have heard of AIM, the Alternative Investment Market.

Self-described as the most successful growth market in the world, AIM is part of the London Stock Exchange.

But while that market allows investors to buy and sell equities in public limited companies and bonds, AIM is focused on smaller start-up companies looking for money to grow and expand.

Some alternative investment funds focus specifically on this market.

Are Alternative Investment Funds Safe?

Like all forms of investment, alternative investment funds present a degree of risk.

Because they are different from mainstream investments, like stocks and bonds, there is a perception that they can carry a greater degree of financial risk.

According to asset management house, BlackRock, however: “While some alternative investments can experience higher levels of volatility than traditional stocks and bonds, as a group, they are no more volatile than any other investment. In fact, many alternatives experience far less volatility than the stock market.”

Please note: Investments can go down as well as up. It is always important to remember that returns made in the past do not guarantee successful returns in the future.

Charlie Howells

After finishing his business studies degree at Bath, Charlie has been involved with a number of startups and finance companies. He regularly writes about personal finance and works as an analyst and writer for Best Savings Rate.