Top 3 Alternative Investment Myths
Alternative investments have gained popularity in recent years as people seek diversification and potentially higher returns outside the stock market.
However, several myths and misconceptions often surround these non-traditional investment options, which can lead to hesitation and skepticism.
Let’s debunk some common myths about alternative investments and shed light on the realities.
Myth 1: Alternative Investments are Only for the Ultra-Wealthy:
Contrary to popular belief, alternative investments are not exclusive to the ultra-wealthy.
While specific alternative options may have higher minimum investment requirements, there are various accessible alternatives suitable for a range of investors.
For example, Blue Bay Fund I allows for more accessible and lower barriers to entry for capital investors.
Decreased Bar to Entry:
Blue Bay Fund I has opened the door for smaller investment amounts in real estate, which typically require much larger amounts to invest.
The initial fund investment amount is only $50,000, and additional investment amounts can be increments of $1,000.
Blue Bay Fund I allows fractional ownership of investment slices, rather than requiring the entire investment.
For example, if you were going to invest in a loan for a new construction project that costs one million dollars, you must have $1,000,000 in liquid cash to invest.
The same loan can be invested in $10,000 increments in our fund for our investors.
Myth 2: Alternative Investments Are Highly Risky:
Reducing Passive Real Estate Investing Risks
While the old adage for profitable real estate investing is “Location, Location, and Location”, the adage for safer real estate investing is “Analyze, Mitigate, and Shift”
While it is true that alternative investments can carry risks, it is incorrect to categorize them as universally highly risky.
Like any investment, risk levels vary depending on several factors. Most investors focus on the underlying asset class of the investment, followed by the exit strategy.
At Blue Bay Fund I, I am hyper-focused on educating investors. These are NOT the best determination of reduced risks; instead, it’s which side of the capital stack their investments are on.
Blue Bay Fund also addresses risks through the following.
1. Diversification:
This is incredibly beneficial and highly sought after. Alternative investments often have low correlations with traditional assets, such as stocks and bonds.
However, even within the real estate category, investors need diversification in assets, geographical location, and the number of investments they hold.
Due to our low entry barrier and fractional investment slices of our opportunities, passive investors can truly diversify their real estate investment portfolios.
2. Inflation protection:
Specific alternatives, such as real estate and some commodities, can offer protection against inflation, which erodes the buying power of traditional investments.
For example, real estate rental income often increases with inflation, while gold historically maintains its value.
3. Access to multiple asset classes:
Alternatives offer exposure to asset classes not readily available through traditional markets.
For example, venture capital provides early-stage exposure to potentially high-growth companies, while private equity allows investment in mature, non-public companies.
These can offer diversification and potentially higher returns, but with added risk.
Blue Bay Fund I offers investments secured by debt and backed by equity real estate across all asset classes, including single-family residential, commercial, and multi-family.
4. Risk-mitigation strategies:
Again, based on which side of the capital stack you choose to invest in —debt or equity —more “risk-managed” alternative investments may still represent a significantly higher risk. Think of investing in a syndication, where you are a limited partner helping to purchase an asset, such as an apartment complex.
I believe and direct Blue Bay Fund I to invest primarily in Debt as this holds the most excellent risk mitigation strategy available across the board.
By becoming the lender, thinking, analyzing, and investing like the banks do, we offer the broadest and most risk-mitigated investment in the alternative space.
Myth 3: Alternative Investments Lack Transparency:
Another common misconception is that alternative investments lack transparency, making it challenging for investors to assess their performance.
However, this is not necessarily true. Many alternative investment vehicles, such as Blue Bay Fund I, provide regular reporting and transparent information on the performance of each opportunity to which the investor allocates funding.
1. Technology Platform:
Many alternative investment services offer a technology platform that provides investors with more detailed access to what is happening with their investments.
Blue Bay Fund investors have a personalized portal, where they can view real-time portfolio values, returns, and assets held by their individual accounts.
2. Due Diligence:
While every investor should conduct due diligence, as a passive investor, this can often be difficult and even overwhelming due to the need to access all the most critical information needed to make a decision.
For example, something as crucial as an appraisal. Most limited partners in syndication may not have access to the appraisal report conducted on a commercial property, or even the borrower's details.
If the passive investor is investing in a mortgage fund, these are never disclosed. My partners at Blue Bay Fund have access to all the information I use to make investment decisions. Complete and full transparency.
3. Reports:
Sometimes, passive investors in syndications may receive quarterly or biannual updates from their general partner; most other reports, such as financial and asset-specific reports, are not readily available, if at all.
At Blue Bay Fund, with the help of our technology platform, we make passive investing easy, streamlined, and transparent, with regular meetings and deal reviews available to all our fund investors.
By debunking these common myths surrounding alternative investments, people can gain a clearer understanding of their potential benefits and risks.
Alternative investments offer diversification, potentially higher returns, and access to unique opportunities that are not available in traditional investments.
Like any investment, a well-rounded portfolio should be built based on your individual goals, risk tolerance, and a clear understanding of the available investment options.
Blue Bay Fund I is leading the charge here in Florida in the alternative investing space for both Debt and Equity investments.
If you are interested in reviewing the fund’s prospectus and investment structure, you can schedule a pitch deck presentation below.
Disclaimer: The information provided in this post is for educational purposes only and should not be considered as financial, tax or investment advice. Always consult with a qualified professional before making any financial decisions.
With Honor,
Edwin D. Epperson III,
Manager & CEO
Soli Deo Gloria
