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Alternatives to financial markets investments

The financial investment is not limited to financial markets assets and the current uncertainties obviously feed such thoughts. Indeed, there are many investment vehicles that could create value in a portfolio. Let’s review few investment ideas mentioned on Next-Finance website.

Article also available in : English EN | français FR

First, it is important to remind readers that thinking about alternative investments should not occur exclusively during a crisis. On the contrary, it must be initiated in normal periods to benefit from the added value (diversification, protection, performance) even in times of crisis.

Moreover, the objective of this review is not to provide investment advice (we do not have a crystal ball!) but to identify and highlight some themes, already mentioned in the past on this portal, that could have drawn attention to. Readers should form their own opinion based on investment idea’s description. However, we will focus on more or less simple investment ideas that are close to our everyday world.

Finally it necessary to note that we do not forecast nor suggest the end of stock market investment. In a previous article, we mentioned the dynamics of the crisis management and some market professionals now point out sources of hope on the bonds (emerging and convertible), currencies and even equities. Ultimately, as Mory Doré so aptly said in its publications «The negative news flow coming from financial markets does not mean we should give up. Let us be reassured. Opportunities will still be around. The only real question nowadays is how to allocate between real assets and financial assets»

That said, one can list, without any ranking, the following themes:

PASSION

Nobles Crus, the perfect blend of wine and finance

Launched in 2008, Nobles Crus is a Luxembourg Sicav investing in the top graded wines and that has registered since launch a performance of 27.65%.

Passion can be a theme of investment. Some investors may be enthusiastic markets fans and therefore are likely to assimilate their stock market investments to "passion investment". In our vision of an alternative investment, we impose on the passion to be independent of the markets. Here the chosen example is wine. There are many investment vehicles with more or less good performances and we will highlight a product often mentioned on this portal.

With stable performance during the previous crisis (2008), such well-managed supports can be an interesting source of diversification and performances. Like Véronique Cioli, Partner at Elite Advisers said «Wine investment offers an investment plan in line with our grandparents’ understanding of savings, an investment in a product that we know» According to her, the profitability outlook remains positive on the industry in general and on their product, Noble Crus, in particular. Now, others players want to ride this wave. It is the case of UFG-LFG, which has just launched the first French Sicav based on wine.

GOING BACK TO THE LAND

Olivier Combastet: « The purchase of farmlands is a good investment! »

Since 2006, Pergam Finances has invested in farmlands located in Argentina and Uruguay. For first in investors, the latent gain is above 40%...

The massive industrialization of the developed economies has contributed to neglect capital gains generated by land working. Management of agricultural resources is and will remain a challenge for all countries in the world. Many players, like the company Pergam Finances, have already anticipated the trend as noted in an article in 2009: Agricultural land rush of investment funds!. What about the current profitability and social impact ? Let’s point out that beyond land purchases, there are now more and more financial markets’ instruments related to farming, including hedging instruments and deep analysis of the risks of the sector

NATURE

Jean-Sébastien Debusschere : « The philosophy of the fund is to purchase and operate the forests around the world. »

Jean-Sebastien Debusschere, CIO of Fourwinds Capital Management explains the strategy of its fund focused on an original approach: forest investment.

Nature can provide attractive investment vehicles. Here, we highlight two specific themes developed by Fourwinds Capital Management: wood and water. More precisely, wood or forest investment is the investment theme of "Phaunos Timber Fund" while other funds deal with the market of water treatment and waste management (Waste Resource Fund - Aqua Resources Fund). Let us add that a good investment based on mother nature must be done within a structure which offers a good diversification through a wide range of opportunities benefitting from our identified natural resource. It should not be a niche created by tax benefits and other government aids. Indeed, direct investment, in highly specialized companies or corporations, is always possible, but it may involve major concentration risk. With regard to the structural advantages, the misfortune of the solar industry illustrate the importance of building a strategy regardless of government support.

LUXURY

Elite Advisers launches Precious Time, a fund which invest in collectible watches

Up to 50% will be invested in Patek Philippe watches, 30% in Rolex, Breguet, Audemars Piguet, Vacheron Constantin and Cartier

Getting exposure to companies involved in the luxury business is already possible through the financial markets. However, it is also possible to go further by focusing on a particular sector. To achieve such a goal, there are some alternative investment vehicles like Elite Advisers’ fund based on collectible watches. According to the firm, Vintage collectors’ watches, like other tangible assets such as rare wines, works of art, vintage cars and diamonds, provide safe havens and are a valid form of alternative investment that has little correlation with other asset classes. Unlike the financial markets, prices are determined solely by demand for luxury goods, for which the already limited supply will continue to shrink. What about the depth of the market and the total assets under management of the strategy?

REAL ESTATE

Real estate: Attempting to explain the increase in prices.

The situation appears to be a paradox. France is just coming out of a crisis but real estate prices have sharply increased during the previous months and have only slightly decreased at the height of the crisis. How can this phenomenon be (...)

It is difficult to carry out an overview of alternative investments without a mention to real estate. There is no need to introduce this theme as it is the main topic of various media and discussions. A theme with a painful past linked to the collapse of US housing markets and Spanish real estate bubble, but also a current good situation (at least for some) with sustained growth in French real estate. The key probably lies in the ability to understand the internal and external factors of the market. We will not write about a particular product but it will simply encourage readers to think about the dynamics of real estate prices, but also on the state of some markets, knowing that there are some hedging instruments available.

SOCIAL

We shall end with a social note, unfortunately, often overlooked.

An Economic Approach to Marriage

Marriages are not always very stable. A divorce rate of 50 % in developed countries serves to prove. We ask ourselves if it is possible to form stable relationships. An economic analysis may be able to answer this (...)

- First of all the added value of an investment is not necessarily and purely financial: the current strong development of the SRI (Socially Responsible Investment) can provide some evidences. Investors can also find satisfaction in the well-being generated by their investment. This logic is relatively new (at least in finance), it would be interesting to analyze the behavior of these assets in times of crisis. There are various SRI investment vehicles and this even raise major concerns
- Finally, basic social acts can generate a non negligible capital gain (or loss) . The institution of marriage may even be part of those acts as outlined in the article on an economic approach to marriage.

B.N , September 2011

Article also available in : English EN | français FR

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