Along with the traditional asset classes, experienced investors also add the so-called third leg of the financial stool to their portfolio, that is, alternative investments. Their development does not depend on bonds and stocks. These investments make the investors’ portfolio more profitable and stable. Moreover, if correctly diversified, it may achieve positive valuation in the case that markets are falling. Another bonus for the investor is the exemption of the revenue from income tax for natural persons for one year after the purchase.
What kind of investments are we talking about?
Alternative investments are focusing on real estate and infrastructure projects, agricultural commodities, energy sector as well as luxury goods, such as works of art, wristwatches, antique furniture, coins, jewellery, diamonds, vintage cars or precious postage stamps. The main symbol of alternative investments are hedge funds. Investing through hedge funds is dynamic and includes various financial derivatives or tools for trading insurance risk.
The third leg of the financial stool
Stocks typically thrive in an environment of favourable macroeconomic indicators, when investors are showing bullish sentiment and anticipate further overall growth of the business environment. Bonds, on the other hand, are a ‘safe haven’ when rates are falling, when investments and consumption need support and when markets are on the decline. Alternative investments offer valuation both when stocks are falling and when bonds are not thriving either.
Optimum composition with ideal revenue
If the portfolio comprised bonds only, the revenue in the past 15 years would be around 4.2% per annum with annual volatility up to 5.6%. A pure stock-based portfolio would have brought home 8.8% with volatility at 14.8%. However, if we combined the portfolio to contain 70% bonds, 15% stocks and 15% alternative investments, we would meet the expectations of most investors. The revenue would be higher than that of a bond portfolio (5.4% with 5.9% volatility). Such a portfolio is subject to decent levels of maximum decline and very early recovery.
A unique portfolio composition
Investments in ACROSS INTELLIGENT ALTERNATIVE PORTFOLIO+ represent a unique mix of alternative strategies, such as hedge funds, real estate investments and commodities, including energy products or private and infrastructure investments. Strategies comprising insurable events represent an important component. Their performance only depends on meteorological influences. The ratio between the respective asset components is set up to prevent mutual dependence of the strategies as well as linkage to the traditional asset classes. It also reflects the anticipated ratio of performance and volatility.
Investments starting at €50 thousand
Minimum entries in alternative investing are on the order of hundreds of thousands of euro. However, Across has prepared a solution enabling investors to participate in such schemes starting at a relatively modest sum that currently stands at €50 thousand. This investment will suffice to put together a quality investment portfolio that will bring the investor revenues matching that of a mixed bond portfolio with the volatility of global bonds. Historical correlation of such a portfolio to stock markets stood at only 0.24. Put simply, the movement of the stock market by 1% in any direction would result in the movement of this portfolio by 0.24% only.
If the investor has held assets in smart portfolios for more than one year, the earnings are exempt from income tax of natural persons.
More information about how to hitch a ride on the individual investment vehicle and strategies under ACROSS INTELLIGENT ALTERNATIVE PORTFOLIO+ will be provided to you by the investment consultants of Across Private Investments.