Alternative Investments: What they are and how WealthPlan approaches them

Alternative Investments is a catch all phrase to capture any investment that does not fall under the broad category of publicly listed stocks and bonds, or registered funds containing stocks and bonds. If you ask a hundred people what an alternative investment is, you probably get a hundred different answers. The reason is that “Alternatives” as an asset class includes many kinds of assets that can range from low risk to high risk, from liquid to illiquid, and from long to short. Alternatives can mean real estate, private markets including non-listed equity, non-listed fixed income, non-listed real estate, commodity investment, infrastructure projects, potentially include the use of leverage and the use of derivative instruments such as options and futures.

In addition to this wide-ranging variety, there can be definitional or “nomenclature” confusion and ambiguity in the “alternatives realm” as well. Take the term “Hedge Fund” as an example. It is a term that is used broadly (and wrongly) because it is not well understood. “Hedge Fund” can be used wrongly as interchangeable with the term “Alternative Investment.”  To clarify the term hedge fund, let’s delve into some history. The first hedge fund was a long/short equity fund launched in 1949. Like hedge funds today, the fund was organized as a limited partnership and targeted high net worth investors. Because of this structure, the offering fell outside of the regulatory purview of the governmental regulation. This, in turn, allows hedge funds to take much bigger risks (not all do) and charge much higher fees, including a performance-based “carried interest” in the profits. These structures are also “illiquid” in the sense that the limited partnership contract can limit an investor’s ability to get their money back.

We at WealthPlan offer an Alternative strategy to our clients, but our version of Alternative differs markedly from hedge funds and many other alternative investment offerings. Firstly, all the investments included in our strategy offer daily liquidity and are registered securities.  The fees associated with these registered securities tend to be more reasonable than hedge fund fees. Thirdly, we maintain a low correlation objective, which means we are seeking strategies that perform differently from stocks and bonds. In periods of crisis, we think of the alternatives allocation as providing portfolio “ballast.”  Finally, we have a secondary “absolute return” objective, which means we want to have very limited downside risks as compared to other types of investments, whether it be stocks and bonds, or aggressive hedge funds.

Our strategy is allocated to 1) an equity long/short strategy, 2) an “event-driven” equity strategy, 3) two CTA strategies that can include commodities, currencies, financial market exposures, and long short exposures, 4) A long/short multi-manager commodity fund, and 5) A diversified alternatives “risk premium” offering. All told, this is a diversified, absolute-return oriented alternatives offering that can help investors experience a smoother portfolio return experience compared to a traditional stock/bond portfolio.


Advisory services offered through WealthPlan Group, a DBA for WealthPlan Investment Management, a subsidiary Registered Investment Advisor of WealthPlan Group, LLC.  WealthPlan Group, LLC is not a registered investment advisor, but is the holding company for WealthPlan Partners LLC and WealthPlan Investment Management, LLC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

No investment strategy can assure success or completely protect against loss, given the volatility of all securities markets. Statements of forecast and trends are for informational purposes and are not guaranteed to occur in the future. All performance referenced is historical and is no guarantee of future results. Securities investing involves risk, including loss of principal. An investor cannot invest directly in an index.

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