Investments made in assets beyond stocks, bonds, and cash, alternative investments are, says Douglas Greenberg, investments employing strategies which exist outside of more traditional methods of investing. A former Morgan Stanley broker and an expert in the field of alternative investments, Greenberg offers a closer look at the process.
"First and foremost, alternative investments offer broader diversification," explains Greenberg, "reducing risk, and, often, greatly enhancing potential returns."
Alternative investments are, he says, beneficial investment strategies for those wishing to build more diverse portfolios, outside of the realms of more traditional funds.
Popular alternative investments, according to Greenberg, include commodities, real estate, private equity, and hedge funds. "Commodities, such as oil and natural gas, precious and industrial metals, and agricultural products—and investments made in them—come with several benefits," explains the expert.
Rising and falling in value in line with supply and demand, commodities, he says, often help to protect against inflation, at least to some degree. "Also, commodities, in the form of index funds, commodity funds, and futures-based commodity funds, aren't sensitive to movements in public equity markets," adds Douglas Greenberg, "offering a degree of protection from the risks associated with investments in that particular arena."
Of real estate, he continues, "Real estate is also beneficial for portfolio diversification, with publicly exchange-traded funds, for example, affording investors an excellent, low barrier opportunity to embrace this form of alternative investment."
Other benefits, says Greenberg, include long-term returns, capital gains potential, and the option to embrace real estate investment trusts.
Greenberg also touches on private equity investment which, he says, offers further potential for greater diversification and returns. "Private equity investments are particularly good for long-term strategic focus," adds the expert.
Lastly, Greenberg turns to hedge funds. "Particularly in non-traditional markets, hedge funds are a form of alternative investment capable of offering a level of diversification tricky to find anywhere else."
Grouped into categories including managed futures, global macro, and multi-strategy, such investments are distinct, he says, in that they offer fewer restrictions on investments which are less correlated, and employ strategies designed to seek out inefficiencies in the market, affording the potential to add significant value both in the short and long term.
"Often misunderstood, and mislabeled as 'exotic' or 'high-risk,'" Greenberg adds, wrapping up, "alternative investments should, in fact, I believe, represent an integral part of almost any investor's portfolio."
Texas-born father of two Douglas Greenberg is a resident of Lake Oswego, Oregon, located 10 miles south of Portland. A graduate of the University of Pennsylvania’s Wharton School of Business Executive Education programs and a former Morgan Stanley executive director, wealth advisor, and senior portfolio manager, Greenberg is known for his problem-solving skills, as well as specializing in alternative investments and asset allocation. A fan of professional soccer and basketball, Greenberg holds a Bachelor of Science degree from the University of Texas at Dallas and, in his spare time, enjoys hiking, sailing, and wine tasting in addition to travel, skiing, and scuba diving.
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