Alternative Investments have brought us the Apple, Google, Microsoft, Facebook, Beyond Meat, Zoom, Uber, Spotify, Twitter and Palantir’s of the world. The list is far greater than that and in a number of industries beyond technology but it shows that even the most successful and most profitable companies that are now leaders in their spaces had a starting point.
Bill Gates and Steve Jobs didn’t just wake up one day to a multi billion dollar empire, it all started in garages, basements, small offices or in someone’s dorm room and they all have something in common. That commonality is that someone believed in their vision and backed up the company, this is almost always a venture capital or private equity investment by a firm or individual. It’s an Alternative Investment, a direct investment into their companies that allows them to execute on their plan of action, to bring to life their vision for tomorrow.
Without this class of investment we would only have a handful of very powerful public companies and the vision of tomorrow would never come to light. Innovation would come to a standstill and solutions would never be found causing a disruption in outdated techniques to more efficient processes for everything from construction to the automotive industry and overall technology. There would be limited artificial intelligence and combating infectious diseases or finding the cure for one would be closed off and dominated by a few players who would control the game.
Private equity firms for instance, for the most part they bring much more to the table than a direct investment, they bring their experience, connections and mentorship to the table. They have a good idea of how to connect the dots and sniff out deals that have the potential of having legs to them. They are the believers of what tomorrow can bring and do it while helping their investors to profit from it.
Venture capital firms do their part in this investment class but beyond deploying capital a vast majority don’t do much more than that. You have the elite ones that really care about the companies they invest in and put together a system that can help these companies to succeed. A capital injection without the value add of an investors experience or input makes it a much riskier investment for both the private company and the investor.
Alternative investments can be anything from private equity, venture capital real estate, commodities, hedge funds, direct investment into a private company, movies to art and antiques, What makes alternative investments a key component of any investment portfolio is that it acts very differently than a publicly traded stock or bond portfolio. They bring forward true diversification, enhanced returns on investments, growth potential that far exceeds a more mature public company and they are typically not a slave to public markets.
They have the potential of being the anchor in a portfolio as the investment usually has a low correlation to other traditional asset classes and that separation allows for these investments to accrue in value and garner the greatest returns over time. They also give life to the ideas and visions of the founders of such private companies, they breed private equity managers who successfully seek out such deals and structure deals which allow investors to benefit from.
So the place of Alternative Investments ranks high on the food chain of investment classes as they have the unique ability to bring the most advancement, the greatest returns in the shortest amount of time and be extremely disruptive not only in an industry but that disruption has the ability to impact our lives forever.
FGA Partners – Managing Partner