Until recently, stock trading was the exclusive domain of high-flying, wealthy Goliaths. With the arrival of avenues such as digital platforms, every-day Davids are entering the arena and, by coordinating their efforts, significantly influencing the prices of targeted stocks. Such was the case of GameStop, with its share price recently experiencing a wild ride after attracting investor interest from different corners, including a band of Davids in Reddit’s WallStreetBets forum.
Alternative is a broad term, taking in whatever is different from the conventional. In investments, that means anything that isn’t stocks, bonds or cash. It’s a large playing field that is attracting an increasing number of investors, including some of the wealthiest in the world. Returns can be high, but so can risks; what are some of these diverse investment opportunities and of what should the shrewd investor be cautious?
The buy side of the investment world is constantly looking for new methods to generate alpha, the metric that represents the active return on an investment versus the performance of a broader market index or benchmark.
The $3 trillion hedge-fund industry is clearly losing its appeal as it delivers progressively lower returns to investors. According to data released by Preqin, a provider of information on the alternative-asset industry, hedge funds yielded average returns of 12.22 percent in 2013, 4.65 percent in 2014 and only 2.02 percent in 2015.