What Are Alternative Investments? A Comprehensive Guide to Expanding Your Portfolio

What Are Alternative Investments? A Comprehensive Guide to Expanding Your Portfolio
Table of Contents

In an increasingly complex financial landscape, diversification is key. But how can you move beyond traditional stocks and bonds to ensure your investments are resilient? Enter the world of alternative investments, a sector that presents unique opportunities and risks. Tailored especially for beginner investors in Singapore, this guide will walk you through the essentials of alternative investments, highlighting local nuances, and the role of platforms like Kilde in this intriguing market.

Definition of Alternative Investments

Alternative investments are non-traditional assets that differ from conventional investment options like stocks, bonds, and cash. They include a wide range of strategies and instruments, often providing investors with diversification and potential for higher returns.

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Types of Alternative Investments

Category Types
Hedge Funds Equity, Macro, Event-Driven, Quantitative, Relative Value, Fund of Funds, Multi-Strategy.
Private Equity Venture Capital, Buyouts, Growth.
Private Credit Direct Lending, Mezzanine, Asset.
Real Assets Commodities, Natural Resources, Infrastructure, Farmland, Energy, Timberland.
Real Estate Residential, Commercial, Industrial, Retail, Mixed-Use, Hospitality, Land.

Why Alternative Investments are Needed

In the modern investment landscape, alternative investments can be a valuable tool for capital preservation, diversification, and potentially higher returns. Especially in dynamic markets like Singapore, alternative assets can add robustness to a portfolio.

Alternative vs Traditional Investments

Understanding the differences between alternative and traditional investments is crucial for any investor looking to diversify their portfolio. While traditional investments like stocks and bonds are familiar to most, alternative investments offer a different approach to growing capital. In this section, we will explore a side-by-side comparison of these two investment paths, shedding light on their unique characteristics and roles within an investment strategy.

Comparison of Alternative and Traditional Investments

Factors Traditional Investments Alternative Investment
Assets Stocks, Bonds Hedge Funds, Real Estate
Strategies Buy and Hold Private Equity, Market Timing
Risk Generally Lower Can be Higher
Diversification Limited Greater

Popular Categories of Alternative Investments

Alternative investments offer a rich array of options for investors seeking to diversify their portfolios. Here is a list of examples of popular alternative investments as well as their respective focus areas:

Category Focus Area
Equity Hedge Funds Equity market investments
Macro Hedge Funds Macroeconomic trends
Event-Driven Hedge Funds Corporate events
Venture Capital (Private Equity) Start-ups and young companies
Distressed Securities (Private Equity) Companies in or near bankruptcy
Fund of Funds (Private Equity) Portfolio of other private equity funds
Mezzanine Financing (Private Credit) Subordinated debt or preferred equity
Direct Lending (Private Credit) Peer-to-peer lending platform
Commodities (Real Assets) Physical goods like gold, oil
Natural Resources (Real Assets) Mining, agriculture, energy
Residential Real Estate Homes, apartments, and housing
Commercial Real Estate Office buildings, retail spaces, industrial properties

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Advantages and Risks of Alternative Investments

In this section, we will explore the key advantages and risks associated with alternative investments, shedding light on what makes them an appealing yet complex choice for investors.

Advantages:

Factor Advantage
Diversification Alternative investments allow investors to spread risk across different types of assets, reducing the impact of any single market downturn. This offers a level of protection that can be particularly beneficial during periods of volatility in traditional markets.
Potential for higher returns Many alternative investments, such as hedge funds and private equity, aim to outperform traditional markets, providing opportunities for higher returns. Although these investments often come with higher risk, the potential rewards can make them attractive for those seeking to enhance their portfolio's performance.
Less correlation with traditional markets Since alternative investments often behave differently from traditional stocks and bonds, they can serve as a buffer against traditional market volatility. This lack of correlation with traditional assets can help in building a more resilient and diversified portfolio.

Risks:

Factor Risk
Higher fees Alternative investments often involve higher fees, including management and performance fees. These can erode returns and make the investments less attractive, especially for those who are not able to achieve the higher returns that alternative investments can sometimes provide.
Less regulation Some alternative investments, such as private funds and direct lending platforms, may not be as heavily regulated as traditional markets. This lack of regulation can lead to increased risks related to transparency, fraud, and other governance issues.
Complexity Alternative investments often come with increased complexity due to their unique structures, strategies, and underlying assets. This complexity can make them difficult to understand and evaluate, especially for less experienced investors.

Alternative investments in Singapore

In the bustling financial landscape of Singapore, investors are constantly seeking novel opportunities to grow their wealth and diversify their portfolios. Here are a few examples of alternative investments available in Singapore.

Category Example
Equity Hedge Funds Dymon Asia Capital’s Dymon Asia Macro Fund
Macro Hedge Funds Quantedge Capital’s Global Absolute Return Fund
Event-Driven Hedge Funds Swiss-Asia's Luma Investment Fund
Fund of Funds (Private Equity) UOB Venture Management
Direct Lending (Private Credit) Funding Societies, Kilde
Commodities (Real Assets) SPDR Gold Shares ETF
Residential Real Estate Ascott Residence Trust
Commercial Real Estate Suntec Real Estate Investment Trust

Among the plethora of investment options, alternative investments stand out as a promising avenue, especially in the field of private debt. One platform leading the charge in this innovative investment realm is Kilde.

Kilde is a pioneering platform in the realm of alternative investments, specializing in the securitization of these assets into privately placed securities. With a license for dealing in securities and a dedication to transparency, quality, and value, Kilde connects institutional and accredited investors with carefully selected private debt deals, real estate debt, venture debt, and more. 

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Kilde connects family offices, funds, and accredited investors to investment-ready private credit deals in developed and emerging markets. We offer senior secured loans to last-mile lending companies with strong capitalization, a healthy balance sheet, and a capable management team. These loans typically last 12 to 36 months, with investors receiving monthly coupons and early redemption rights. So far, Kilde has maintained a 0.0% default rate.

Offering returns of up to 13.5*% per annum, Kilde serves as a bridge between private credit investors and lending firms. By focusing on meticulously analysed investments, Kilde enables both seasoned and novice investors to venture beyond traditional stocks and bonds, tapping into a dynamic market with strong growth potential.

Key benefits include: 

  • High yield: Get up to 13.5% p.a. for products that yield 8% p.a. elsewhere
  • Zero transaction cost: Save up to US$100,000 in investment structuring fees.
  • Deal flow access: US$100M+ carefully vetted and constructed senior secured private credit deals
  • Investment-ready: Skip lengthy and labor intensive investment due diligence
  • Flexibility: Most deals have an option of early redemption at face value with no penalty. 

Learn more about how Kilde is redefining the investment landscape in Singapore here, and embark on your journey towards lucrative private debt investments today!

Sources:

  1. investopedia.com
  2. sg.finance.yahoo.com

*KILDE PTE LTD (“Kilde”) is incorporated in Singapore (registration no. 201929587K) is licenced and regulated by the Monetary Authority Singapore and holds a Capital Markets Services Licence (CMS101016) and an Exempted Financial Advisor License under the Financial Adviser Act. The information provided in this marketing material is intended for “accredited investors” and “institutional investors” (collectively “qualified persons”) only. This marketing material, and any information in this marketing material, or any documentation that Kilde provides in relation to this marketing material is provided without any representation or any kind of warranties whatsoever (whether express or implied by law).

This advertisement has not been reviewed by the Monetary Authority of Singapore.

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Oleg Kryukovskiy
The founder & co-CEO of KILDE
Radek Jezbera
Founder & co-CEO of KILDE, a regulated platform for alternative investments.
Aleksandra Yurchenko TEST
Aleksandra is managing investor relations at KILDE
Aleksandra Yurchenko
Aleksandra is managing investor relations at KILDE

FAQ

What are alternative investments?

Alternative investments include non-traditional assets like hedge funds, private equity, real estate, and more, differing from conventional stocks and bonds.

Why are alternative investments popular in Singapore?

Singapore's robust financial ecosystem and regulations make it a favourable market for alternative investments, including offerings by platforms like Kilde.

What are the main risks associated with alternative investing?

Risks include higher fees, less regulation, and complexity, requiring careful consideration and potentially professional guidance.

How can I start investing in alternative assets in Singapore?

Platforms like Kilde offer curated access to alternative investments in Singapore, making it easier for beginners to explore these options.

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