These Under-the-Radar Investments Are Producing Record Breaking Returns

While stocks and crypto tend to get all of the attention in headlines, these lesser-known alternative investments are producing record gains.

Alternative investments typically have a very low correlation to the stock market, so regardless of how the market performs in the coming months these three asset classes should continue to generate positive returns.

Farmland

Most of the real estate headlines in recent months have been focused on the price growth of single-family homes, but the strongest performing real estate sector across most of the country has actually been farmland.

According to data from Farmers National Company, farmland prices are up 20% in some areas of the country so far in 2022. 

The strong price appreciation in farmland is partially due to the rising prices of commodities like corn, wheat and soy. The other, less talked about, reason for the growing value of farmland is the fact that the supply of agricultural land is rapidly shrinking while the global demand for food is increasing.

How to Invest in Farmland: Buying a farm isn’t a feasible option for most investors. Luckily, there are some more practical choices available.

Farmland REITs, such as Gladstone Land Corp LAND and Farmland Partners Inc FPI offer retail investors a low-cost, passive option to invest in this asset class. However, these REITs are still vulnerable to stock market volatility and may underperform if we’re heading into a bear market.

Another option is to invest through a farmland investment platform, like AcreTrader. These platforms allow individuals to invest in professionally managed farmland assets through the private market. The minimum investment is higher than a publicly-traded REIT, but the private placements have little correlation to the stock market and stronger potential returns. 

Wine

Most people enjoy drinking wine, but very few understand the potential this asset class has as an investment. Fine wine is typically meant to be enjoyed several years after it’s bottled since the flavor matures with age.

As wines approach their peak maturity, the demand increases while the supply shrinks as bottles are being consumed. This creates a perfect scenario for the price of these bottles to climb, allowing investors to realize an attractive return.

Wine has historically performed well as an investment, but this market has produced record gains over the past 12 months.

The Liv-ex 1000 index (which tracks the price performance of the 1,000 most-traded wines in the secondary market) was up 10.3%% year to date as of May 31, 2022.

In fact, 2021 broke all previous records for the secondary fine wine market, tracked by Liv-ex. The Liv-ex 100 exceeded its decade-old high, and both the Liv-ex 100 and Liv-ex 1000 indices closed the year with an 18-month consecutive rise.

Fine wine is a tangible and consumable asset, so its value is more protected than many traditional, non-tangible investments. This feature has made wine a historically stable investment, only losing 1% during the 2008 market crash while the S&P 500 was down 37%.

How to Invest in Wine: Loading up on bottles from the local supermarket probably won’t result in any financial returns. Wines that trade on the secondary market come from the top producers and are often difficult for the average individual to get ahold of.

The best option for most retail investors that want to enter the wine market is to invest through a wine investing platform that can source the most highly sought-after bottles and has the connections to sell them when the time is right.

Contemporary Art

Art has been a treasured asset for centuries and its popularity is still growing. Over the past six months, the Artprice Contemporary Art Index is showing returns of 18%.

According to artprice.com’s The Contemporary Art Market Report for 2021, $2.7 billion worth of contemporary artwork changed hands at auction over the 2020/21 exercise, which is a new record for the market. This figure includes a total of 102,000 contemporary works changing hands over the 12 months, which is 10 times more than 20 years ago.

The 12-month period also included some extraordinary price gains on multiple works. Flora Yukhnovich’s Pretty Little Thing (2019) went to auction with a high value of $80,000 but sold for $1,179,500. Amy Sherald’s The Bathers (2015) was given a high value of $200,000 before going to auction and ended up fetching nearly $4.3 million.

How to Invest in Art: Even paintings valued as low as $15,000 saw 10x price gains last year, so it’s possible for individual investors to get into this market directly. However, knowing which artists and paintings are going to see an increase in demand is another story.

Fortunately, retail investors have a few options for investing in pieces of contemporary art that have been selected by experienced experts in the field. A handful of alternative investment platforms are providing access to individuals with securitized shares of iconic works of art and through managed funds. 

In fact, one platform recently announced that the sale of one of its paintings produced a 33% net internal rate of return (IRR) to investors in about 13 months.

Photo by Polina Rytova on Unsplash