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What are Alternative Investments?

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Definition of Alternative Investments

There is no generally valid definition of the term 'alternative investments'. However, they can be divided into different categories as shown in the attached graphic. However, across the various categories, alternative investments all have the same characteristics:

They are often highly complex investment products or use particularly innovative investment strategies. This in turn can have a direct impact on the liquidity of such investment products. Where investors in traditional asset classes (equities, bonds, fixed-income securities, investment funds and other listed securities) have the possibility of reacting to sudden market movements at any time and selling their units, shares in many alternative investments cannot easily be traded.

Finexity gives its investors the opportunity to invest in exactly these alternative assets without losing the advantages of the classic liquid asset classes. This gives investors the freedom to put together their own portfolio with tangible assets that were previously only available to large investors.

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Market Size - Learning from Professional Investors

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In 2018, the assets managed by European investment companies in the field of alternative investments amounted to over 1.62 trillion euros. This represented an increase of EUR 300 billion in just three years.

The growth of the market for alternative investments is driven by high demand from institutional investors. In times of low interest rates, these investors are looking for the best returns and currently find them in alternative assets. Investors are increasingly focusing on tangible assets, private equity and venture capital.

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Focus: Real Assets

The term 'real asset' is used to describe assets that are based on a real, physical value in the classic sense. This intrinsic value gives real assets the characteristic of being relatively independent of fluctuations in monetary value and minimising the risk of total loss. For this reason, real assets are very well suited as an anchor position for any portfolio to build up and secure assets in the medium to long term. In addition to precious metals such as gold and silver, the focus is increasingly on niche markets such as art, classic cars or diamonds. However, investments in these real assets require a particularly high level of expertise, know-how and a sustainable investment strategy.

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Reasons for Investing in Alternative Asset Classes:

High returns

Avoid low interest rates - More and more investors are looking for alternative investment opportunities. Alternative investments are becoming increasingly important.

Low volatility

Protect yourself from the volatility of the stock markets - investments in real assets are usually subject to hardly any fluctuations and minimise the risk of total loss thanks to their physical value.

Diversification

A good investment portfolio always consists of investments from different geographical regions and should include a range of different asset classes.