Real Asset Alternative Investments

Genuine alternatives to financial investments are considered to be ‘real’ or ‘hard-asset’ investments. Immoveable property such as real estate, farmland and timber properties are considered to be viable alternatives to financial assets, and moveable property like gold bullion, fine wine and rare stamps are also considered to be genuine alternative investment assets.

The case for real-asset investing is compelling; those with sufficient expertise in order to identify good quality assets in high demand can generate substantial financial gains as the inherent value of their assets grows over time. But in almost all cases, specific expertise is required in order to identify, properly value, and measure the risk associated with niche assets like timber properties or fine wine, and a lack of credible asset analysis, along with a non-existent regulatory framework have made this area of investing very high risk for most investors, many of whom have been subject to mis-selling, misrepresentation, poor advice or outright fraud.

Investors acquire certain assets as they are unlikely to depreciate over time, and when demand for the asset or its produce increases so too does the inherent value of the asset itself. So properties that are finite in supply yet have an essential function such as agricultural land, and forestry investment properties, are likely to see values rise as the global population grows and developing nations become wealthy and demand more resources. Niche sectors like fine wine also benefit from increasing demand for finite assets. As only a certain volume of a particular vintage is ever produced, the value increases over time as existing stock is consumed, and more buyers come into the market demanding the best quality product. The same could be said for other collectibles like stamps, antiques or rare coins. The basic underlying strategy remains relatively static across most in real-asset investing; acquire useful or desirable tangible assets, of which supplies are limited and demand for which is rising.

Core to the success of any property or asset-based acquisition for investment purposes is due diligence. Investors must be assured of the value they are receiving for the money they invest, and of the risks they face as an owner of such an asset. Often times such investment projects are structured so as to raise sufficient capital not just for an asset purchase, but also for its improvement and/or future operation or management, and in these cases it is paramount that an investor has ultimate confidence in the knowledge and ability of all of the counterparties which have an on-going responsibility to the good and proper management of the asset.

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