While the global investment environment is clouded by economic recessions, credit crises and wars, wealthy entrepreneurs still find a ready pool of asset management specialists to assist with alternative investments.

What constitutes a good investment depends on who you ask. A hedge fund manager may point to the favourable short- and long-term outlook for a unique asset mix far removed from traditional single asset classes. Unsophisticated investors are certainly disillusioned with the security and predictability offered by traditional asset classes, including listed equities at US dollar deposits.

The average investor, however, has more difficulty understanding different investment concepts. A property investment, for example, is easier to understand than equity investments, and returns are easier to predict because property value is less likely to depreciate because of factors such as corporate fraud and accounting manipulation.

Aidan Healy, managing director of Singapore-headquartered corporate consultancy Healy Consultants, says many of his Firm’s Clients are wealthy entrepreneurs keen on investing in Asia, which according to the United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report 2007 receives two-thirds of global foreign direct investment (FDI). Common Asia investment routes include:

Property
In 2006 and 2007 booming Asian property proved a reliable investment for entrepreneurs wanting to chart accurate paths of returns with a wealth of figures to hand. Direct commercial real estate investment in Asia Pacific reached a new high of US$121 billion in 2007, up 27% on 2006. However, the global subprime crisis has led international property consultant Jones Lang LaSalle to predict a decline in overall property transaction volumes in more ‘mature’ markets such as Tokyo, Singapore, Sydney and Melbourne. However, emerging markets such as China, the Philippines and Vietnam are expected to see continued growth, with attractive returns on investment.

Managed funds
Managed funds are a lazy man’s investment. If you have excess cash flow and do not have time to analyse securities, why not purchase managed funds? The price you pay for such a lazy investment is usually large fund manager fees, often offsetting fund growth.

Just like listed securities, managed funds can be unpredictable, too. For example, fundamentals may appear to underpin bullish longer-term sentiment on managed funds, despite the best efforts of stock markets to suggest otherwise.

Despite the global economic downturn, the fund management sector remains buoyant. While banks, building societies, life insurance, brokers and general insurance Firms have all noted a decline in business volumes and profitability, asset management Firms continue to grow their teams to cater to wealthy investors from Asia and the Middle East. Global wealth managers now actively manage US$17.4 trillion, with new flows from Asia compensating for market index losses by accounting for 13% of total assets.

Hedge Funds
A hedge fund is a popular managed fund, with managers typically collecting performance and management fees from the Client. Hedge funds are discretionary because they are required to make little information public, to protect the integrity of the fund manager’s trading methods.

Private equity funds
Private equity is an exciting investment genre with high risks and high rewards. The absence of public information and lack of exchange listing bureaucracy makes private equity an attractive experiment for a savvy investor. Private equity has shown a proven ability to outperform public companies on key metrics, despite the credit crunch. The best private equity investors are able to deliver superior profits, value and investment returns. That said, private equity firms are likely to hold investments longer and to see slower multiple growth before the market corrects itself.

Nothing ventured, nothing gained
Venture capital investments are inherently risky, too, though they also come with the prospect of above-average returns. However, a drought of venture capital-backed initial public offerings (IPOs) on leading exchanges in 2008 is a combination of nervous investors, the credit crunch and the general economic slowdown, making IPOs a less attractive source of capital for fast-growing companies.   

A key downside of venture capital investment for the recipient is the role many angel investors demand in the day-to-day running of a business.

Conclusion
Most investors would be advised to treat alternative investments as a gamble which they can afford to lose.

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