In FY2022, it was reported that around 885 AIFs (Alternative Investment Funds) were registered all across India. Moreover, the industry saw a growth of 42% in a time frame of the same year. It is, hence, a well-estimated fact that the alternative investment market is experiencing a boom in the country this time around. This recent hike has led institutional investors to switch most of their allotments to alternative investments because of the stability they provide as compared to stock and the diversification they bring in terms of portfolio building.
Why is There a Sudden Need for Alternative Investment?
The world is currently experiencing inflation as a by-product of political tensions and the war. Alternative forms of investment are a great shield against the fluctuations caused in the stock market due to these geopolitical issues. Investment in alternative options, such as real estate, gold, etc., provides a hedge against inflation and, not to mention, diversifies the investor portfolio. Alternative investment produces high ROI and has low transactional costs.
Top Opportunities in Alternative Investment Market
Following is a list of options with the highest return opportunities when it comes to alternative investment options:
Real estate is seemingly the top player in the alternative investment market. Real estate investment is a good choice for passive income as the returns are stable and concrete. Real estate is, as always, expected to outperform several sectors and provide stable income even at times of political turmoil and inflation. Real estate businesses mostly focus on warehouses and commercial real estate as reliable sources for generating profits.
The P2P lending market has predicted a growth of 31% CAGR. P2P lending basically comprises individuals looking for loans in terms of personal or educational loans. This also includes lenders investing in the top students and getting a part of the student’s salary after placement in the near future. This whole process allows them to gain loans at better rates of interest and provides lenders with better chances of return on investments.
Works of art end up generating multi-million dollar profits. Therefore investing in art not only promotes artists, but if the research is done right, it can end up generating a good amount of capital for the investors. Investing in reliable artists who have a record of generating millions from their art can be highly lucrative for retail investors who are interested in not only a source of passive income but also a source of promoting art and artists.
Wine and whiskey investments have a record of 20.9% returns. The quality of wine appreciates over time. The supply of fine wines sees a decrease as the values are increased over time. These are alternative asset classes and are not essentially affected by any economic crisis. For instance, the prices of alcohol were not affected heavily by the 2008 recession. The demand for Italian wine has seen a surge of 35% in recent years.
Equipment finance is essentially a form of asset leasing. They can be used for a variety of assets, such as machinery for companies, businesses, factories, office needs, etc. This can also include heavy machinery such as airplane parts, ships, hospital machinery, etc. It is estimated that around 8 out of 10 companies prefer leasing equipment instead of outright buying them. Leasing not only maintains cash flow but helps with tax benefits and write-outs.
Litigation or legal finance is the process of providing capital to plaintiffs with low cash flow participating in lawsuits so as to increase their chances of winning. This, in turn, would provide the investors with profit in case the plaintiffs win the lawsuit. They will get a guaranteed amount of share from the settlement money. Litigation funds help cover the legal fee of the lawyers and any other costs related to the lawsuit. Litigation finance has a record of a whopping 56.8% return range.
NFTs and Crypto
We are the first generation operating in the era of the metaverse and AI-powered technologies. It is high time to acknowledge the importance of the digital era. NFTs or Non-Fungible Tokens function on blockchain technologies just like cryptocurrencies. Because of this security, the NFTs or Cryptos cannot be hacked and altered. They are immune to stock market fluctuations, and each of these assets is unique and built in a finite number. Hence, they are an emerging form of alternative investments in the modern world.
An alternative investment is a highly lucrative sector that can be a stable source of passive income option for retail investors and institutional investors alike. The above article shows a list of sectors that operate under alternative investments and bring high ROI. Investors can always look for another range of alternative investments that suits their boats and aligns with their financial margins. Want to learn more about new developments in the alternative investment markets? Head on to Bhive Alts , one platform that provides solutions to all your investment-related queries.