The Rise of Alternative Investments

The investment market is in the midst of an exciting transformation. It’s a steady but seismic shift, caused by two driving forces. First, the rise of alternative investments; that is, any investments other than bonds or shares – in particular, new digital asset classes such as crypto and tokenized assets. And second, the exponentially broader spectrum of investors who can now access those alternative investments. 

Wealth99 is at the forefront of both forces behind this revolution. Launched in 2017, the fintech company is using blockchain-based technology to bring alternative assets to everyday people. People who, until now, have been excluded from investing in this thrilling new asset class.

Wealth99 CEO Ian Lowe says: “Investments beyond ordinary exchange-traded shares and bonds were once the preserve of institutions, hedge funds, and the ultra-wealthy. But now with blockchain and tokenization technology, everyday investors are able to diversify their portfolios with alternative assets, like precious metals and cryptocurrencies - simply, quickly and cost-effectively.”

We are just at the beginning of the era of alternative assets. By the end of this decade, it’s estimated that trillions of dollars will be reallocated from traditional assets - such as shares, bonds, and ETFs - into tokenized alternative assets. 

So, why are alternative investments on the rise? What are the key benefits of blockchain technology and tokenization, which are driving the investment industry forward? And how do alternative asset investment companies like Wealth99 fit into the picture? Let’s find out.

Fractional ownership and the democratization of wealth

Tokenization is the process of creating digital versions of real-world assets such as fine art, property, and shares. And it has thrown open the doors to alternative assets by enabling fractionalized ownership. When an asset is tokenized, its ownership can be split into tens, hundreds, even thousands of tiny fractions – meaning thousands of individual investors can purchase their own small slice of the pie. Tokenization is essentially democratizing wealth, by making alternative investments more accessible to many more people.

Where investors once needed $80,000 to buy a bar of gold, now they can invest in precious metals from as little as $500. And this example isn’t imaginary; it’s already happening today. Wealth99 has pioneered the tokenization of gold, silver, and platinum, and clients can purchase precious metal tokens via Wealth99’s user-friendly platforms. All with a minimum spend of £/$500. 

The end of the accredited investor

‘Accredited investor’ status is a somewhat arbitrary designation, based on an individual’s wealth. It’s the qualification that decides whether someone should be allowed access to alternative asset opportunities. Investors who don’t meet the criteria have fewer options to diversify their risk and supplement their income. 

This approach is patently unfair and only serves to entrench wealth inequality. It’s also more than a little hypocritical. Governments claim accredited investor status is there to protect people who might not understand the risk involved. Yet these same governments allow gambling and lotteries, often with no restrictions on how much money people throw away. 

Blockchain technology and tokenization could spell the end of the unfair institution of ‘accredited investors’. By making it simple to purchase or sell any asset online, and by allowing for fractional ownership (which lowers the cost barrier to entry), tokenization will open the door to everyday investors. And not just those the government arbitrarily deems ‘qualified’ to invest. 

The simplification of investing 

Another barrier that has long held everyday people back from investing in alternative assets is the extreme complexity of the process. Currently, the alternative asset investment model is mired in complicated administration processes – many of which require (expensive) professional management. Due diligence and compliance processes are typically based on fragmented and inefficient legacy systems, which create another barrier to entry for everyday investors. 

Blockchain-based systems are changing this for the better. Blockchain technology enables digital proof of identity and simplified integration. With processes such as KYC and AML compliance partially automated, the administration side of alternative asset investment just got a whole lot easier for non-professionals to handle without the help of costly middlemen.

A re-evaluation of the traditional 60/40 portfolio

It’s been a volatile past few years in the traditional markets. The world has dealt with COVID, the Ukraine war, the worst inflation in 30 years, and rapidly rising interest rates. Many are starting to question the wisdom of the traditional 60/40 portfolio strategy, which places 60% in shares and 40% in bonds. Instead, savvy investors are considering allocating a portion of their funds to ‘non-correlated’ alternative assets – meaning those that aren’t tied to the traditional market’s performance. It’s looking increasingly likely that in the future, a truly diverse portfolio won’t simply include different assets within the same market – but different markets entirely.  

New opportunities for financial professionals

The rise of alternative assets also represents a significant new opportunity for financial professionals. With tokenization ushering in the democratisation of wealth and opening up alternative assets to the masses, more and more clients will be turning to their trusted advisers for guidance.  

The accountants, lawyers, and investment advisers who can offer this specialised alternative asset advice with confidence will soon emerge as leaders in their field. Adding the potential for a whole new revenue stream to their business. 

How can everyday investors ride the wave of alternative assets? 

From simpler investing to genuine diversification, to the democratisation of wealth, the benefits of alternative assets are undeniable. And for the everyday investor looking to make the most of these benefits, one tool could prove most pivotal; the right education.

The savvy investor’s first step should be to seek insight into the different options, and how they might fit into their wealth-building strategies. This is why education is a key pillar of Wealth99’s client service. Wealth99 believes that self-directed learning is the best approach, so the company has created an archive of resources in a wide variety of learning styles – including short courses, video, and written educational content. For investors seeking to explore the world of alternative assets, this library of learning material could be a great place to start.  

The rise of new opportunities

Finally, we’ll end with a word from Ian Lowe, CEO of Wealth99. “We are looking ahead to many exciting new alternative asset investment opportunities that are only possible with blockchain tokenization technology. We’re also looking forward to welcoming new investors into the market - people who until now have been excluded by unfair ‘accredited investor’ criteria. The rise of blockchain-based alternative asset options and the democratisation of investing it brings with it is a game-changer. And it’s only just getting started.” 

You can learn more about Wealth99’s perspective on alternative assets and tokenized investments at wealth99.com

 

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This content contains sponsored advertising content and is for informational purposes only and not intended to be investing advice.