Alternative investments may have only started capturing the attention of retail investors over the past couple of years, but alternative assets have been a significant component of the strategies of hedge funds and other institutional investors for decades.
Alternative investments can provide a hedge against market volatility and inflation, and many have produced stronger returns than the stock market.
These three alternative investments have shown stronger returns than the S&P 500’s 68% total return over the past five years:
While the Liv-ex Fine Wine 1000 index didn’t quite beat the S&P 500 over the past five years with its gain of 50.7%, certain region indices saw incredible growth.
The Champagne 50 by Liv-Ex gained 93.2% over the past five years and the Burgundy 150 is up 121.3%.
Burgundy has produced consistent gains over the time period, but the past year has been the most impressive. The index is up 50.3% over the past year and 22.3% year to date.
Retail investors have gained access to this market by purchasing securitized fractions of wine collections, as well as by buying and selling individual bottles through investment platforms.
There are also a handful of wine-related stocks and ETFs that provide exposure to the wine market. Constellation Brands, Inc. STZ produces, imports and sells wine, beer and spirits in North America, New Zealand and Italy. Its wine brands include Meiomi, Robert Mondavi, Kim Crawford, SIMI, Ruffino and several others.
Constellation Brands has produced a total return of 42.7% over the last five years.
The contemporary art market has drawn a lot of attention over the past couple of years, which has boosted this historically strong asset class even more. Just last month, Andy Warhol’s “Shot Sage Blue Marilyn” sold at auction for $195 million, becoming the most expensive piece of 20th century art to ever be sold at auction.
The Artprice Contemporary Art Index gained 82.9% over the past five years and is up 11.5% in just the past six months.
Some of the greatest returns through art investments are realized on works that are valued well over $1 million, leaving the average retail investor out in the cold when it comes to participating in this market. However, certain platforms are now securitizing and selling shares of iconic paintings from artists such as Andy Warhol, Pablo Picasso and Banksy.
Most real estate investment trusts (REITs) are publicly traded on a major stock exchange, leaving them vulnerable to market volatility. Non-traded REITs, on the other hand, aren’t priced based on the market sentiment on any given day. Instead, these REITs are priced based on the net asset value (NAV), meaning investors directly benefit from increasing real estate values.
The Stanger NAV REIT Index gained nearly 70.1% over the past five years, compared to the S&P United States REIT index with a five-year total return of 41%.