Are You Benefitting From Alternative Investments?
Are You Benefitting From Alternative Investments?
Many investors are looking for innovative techniques to produce predictable income, conserve their capital, guard against market volatility, and offer an appealing overall return in light of the current market volatility and rising inflation. This entails a departure from the more conventional stock and fixed income investments and a shift to alternative forms of investing.
What are Alternative Investments? Are You Benefitting From Alternative Investments?
Financial assets that don’t fall into the traditional investment categories are known as alternative investments. Since they are investments in private businesses rather than securities traded on a stock exchange or market, they are not impacted by the frequent price fluctuations witnessed in the open markets.
Many investors are learning that simply increasing the geographic or industry variety of their stock holdings will not give them the diversification and genuine security they desire. When things go wrong, public equities see a quick and essentially indiscriminate selloff, which hurts the vast majority of publicly traded stocks.
Private equity is a key type of alternative investment that has proven profitable even during times of stock market swings and downturns. Private real estate investment trusts (REITs) are prime examples of private equity designed to generate both stable income and consistent growth and are an excellent way to diversify your portfolio.
An Alternative Point of View
Leading pension plans and endowment funds are one place investment experts seek for market knowledge on how to best safeguard their clients. Plan administrators saw it was getting more difficult to align their regular payout streams with what was being generated by their traditional investments after experiencing many stock market crises. In order to increase their capacity to fulfil their future payout commitments, they started looking for strategies to considerably lower the volatility of their portfolios. From 14% in 2005 to 42%A in 2020, the relative shares of CPP, OMERS, OTPP, CalPERS, Yale Endowment, and Harvard Endowment have significantly expanded during the past 20 years. These plans, which collectively manage more than CAD 1.7 trillion, significantly raised their allocations to alternative investments as a result of their shared realisation of the substantial advantages these investments provide. This trend has trickled down to investors who have realised that alternatives are a crucial component of a contemporary investing portfolio, following their lead.
Private real estate, like multi-family buildings, is a tried-and-true category of choices. It presents an exceptional investment opportunity and has the potential to generate income from three sources: dependable cash flow from operations; equity growth from mortgage principal repayment (in a sense, the tenants buy the building for you); and potential long-term increases in property value.
Private multi-residential homes have five main advantages above conventional investments.
- Higher Total Returns with Less Volatility: The Private Canadian Apartments index provides information on the performance of multi-residential complexes. Private Canadian Apartments have not only beaten Canadian Bonds and Canadian Equities over the previous 37 years by 45% and 5%, respectively, but they have also never experienced a year with a negative annual return. Between 1988 and 2021, private Canadian apartments had the lowest annual return of 1.7%, while Canadian stocks had the lowest annual return of 33%.
- Get Better Downside Protection: Investors have received a large amount of downside protection and that to private Canadian apartments. All of the major equity markets (Private Canadian Commercial Real Estate, Canadian Bonds, U.S. Equities, Global Equities, Canadian Equities, and Emerging Markets Pyramine) have experienced numerous years with negative annual returns, in contrast to Private Canadian Apartments, which have never experienced this. Private Canadian Apartments nevertheless had a positive return of about 6% even in 2008, the single worst year for international investing since the early 1930s.
- A Proven Hedge Against Inflation: Commercial real estate in the United States & Canada has often offered positive yearly returns over the past 44 years during times when inflation (as determined by the annual change in the Consumer Price Index) was over 4%. Since data for the Canadian Private Apartment Index before to 1986 were not available, the private commercial real estate market in the United States is used as a stand-in for inflation study. Although the correlation between real estate and inflation shouldn’t be the main element for real estate investing, it is a factor that should be taken into account when analysing the advantages of diversification for a multi-asset portfolio.
- A More Tax Efficient Way to Invest: Even though interest income is generally less tax efficient than dividends received from common/preferred shares, both may be significantly less efficient than distributions from a private REIT, whose return of capital is typically tax-free at the time of distribution and lowers the investment’s adjusted cost base, affecting how it is treated upon sale/redemption. Private REITs produce tax-effective cash flow with a potential return on investment of 100%. Contrary to Canadian Common or Preferred Share and interest-bearing assets, where the overall taxes wind up being significantly greater, taxes paid on a private REIT during a 5-year holding term would be reduced and might perhaps be deferred until the investment is sold.
- Preserve Capital: To achieve the same $500 monthly after-tax income stream as an investor with $100,000 in a private REIT, you would need to invest substantially more in a 6% interest-bearing asset or preferred/common share. By selecting a private REIT to produce your necessary cash flow, you might potentially increase the overall returns of your portfolio by freeing up a sizeable amount of capital for other investments.
- Add more options to your portfolio
Investors need alternate means of generating reliable income, protecting their capital from market volatility, and achieving an alluring overall return as they become more and more apprehensive of the ongoing volatility in the traditional public markets. Through Pyramine Fund, all Canadians now have access to the advantages of options and Private Canadian Apartments. You can take advantage of all the advantages of alternatives, enjoy the yield from rental income, and contribute to the growth of the underlying properties through this Fund without having to deal with the difficulties of being a landlord.
- Introducing a New Way to Grow Your Wealth
Pyramine, is one of a pioneer in private real estate investments, offers a range of alternative investment options, (Co-ownership Program Fund and Income & Development Fund), and is currently giving investors exclusive access to a noteworthy new development project that is anticipated to produce a targeted 20% annual net return (average based on 3-5 years project term). Investors have the chance to join Pyramine in the construction of a contemporary mid-rise condo in Toronto and Southern Ontario. It’s an excellent chance for Canadian investors since they can use their current registered funds to invest.
Get in touch with us right now to find out how you may invest in this exciting new development opportunity and enjoy all the advantages of alternatives.