In the eyes of many institutional investors and high-net-worth individuals, investing in alternatives continued to emerge as an attractive investing option in 2015. This positive trend is expected to continue throughout 2016 and 2017, as the uncertain – possibly overvalued – public markets drive more and more investors to seek-out profitable returns in other markets.
The fact of the matter is that years of increasing volatility in public equities, and the shrinking yield on bonds, has caused battered investors to seriously consider introducing alternative assets to their portfolio, particularly as a means of diversifying their investment holdings. In 2015, wealthy investors were looking for real protection from market swings, and alternatives have stepped-up to meet their needs.
Among all the alternative investment opportunities available to investors this coming year, there are three investments that – based on historical performance, economic forecasts, and reviews – will deliver great performances for investors in 2016: real estate, precious metals, and investing in shipping containers.
The definition of what constitutes “investing in real estate” is expected to continue to expand in 2016. As investors seek to balance capital conservation with capital growth, it will become more difficult to classify investment-seekers as core, value-added, or opportunistic. Instead, 2016 will see the investment community searching out a wider spectrum of real estate offerings in both established and emerging markets.
The ever-evolving forces of globalization, technology and urbanization are constantly influencing one another. We can expect that this will require real estate investments to be evermore dynamic as they adapt to a networked world.
In 2016, “mixed use” investments that combine condominiums, offices, retail space are forecast to be strong in urban markets. Much of this will be driven by the growth of e-commerce and shifting consumer behaviors, that will encourage companies to make constant improvements to their supply chain. Because of this, the demand for industrial buildings and land that is suited for distribution centers will rise across the globe.
The next 24 months look doggone good for real estate. – Lending Officer, Major Financial Institution
Aside from new real estate buildings and developments, analysts expect significant investment into the redevelopment of older buildings. This will come about as companies begin to recognize the need for facility upgrades to accommodate the growing demands of tenants. After all, in business – like biology – adaptation is the key to survival and maintaining a competitive advantage.
Analysts from across the globe are forecasting that gold prices will rebound in 2016, climbing to $1250 an ounce. As well, both silver and platinum are expected to see higher prices too, rising to $17.50 and $1100 respectively and giving investors compelling reasons to invest in precious metals.
If you’ve never owned gold stocks, this probably isn’t a bad time to add them. – William Bernstein, Author of “If You Can: How Millennials Can Get Rich Slowly.”
The strong international demand for Silver, coupled with a drop in production in 2015 – 23 percent in Canada, 5 percent in the United States, and 4 percent each in Australia, Chile and Mexico, is very likely to have a major impact on the precious metal’s value in 2016. After all, basic economics suggest that when demand increases and the supply declines, prices will rise sharply.
Driving this strong demand for Silver is a new and major purchaser: India. To give an indication of the level of their demand, in August 2015 Indian investors imported $363 million worth of silver, 48% more than they did a year earlier in 2014. In September 2015, more than $433 million worth of silver was imported into the country, demonstrating India’s continued demand.
With the global financial crisis nearly a decade in the past, countries all over the world have persevered and – with the help of the container shipping industry – have delivered a strong recovery. Their economic growth has been fueled by making strategic investments in areas that facilitate global trade, like ports, terminals, and infrastructure, and also encourage domestic prosperity.
According to industry research, more than 90 percent of the world’s consumer cargo is delivered by the container shipping industry. Thus, investors can expect that any increase in a country’s GDP is going to mean an increase in the number of shipping containers needed to facilitate the demand. Regardless of whether they are imported or exported containers, the international container fleet must be prepared to facilitate economic growth.
Even in countries like the United States, where the economic recovery has been slow, government officials are seeing growth rates of close to three percent; and this is translating into rising demands at shipping ports and container terminals across the nation.
[Over the longer term] our expectation is that container growth is going to grow relatively in line with GDP. – Moses Kopmar, Moody’s Analyst and Author of Moody’s Investors Service Report
In prospering nations like China – which will see growth rates of approximately seven percent – the need for shipping containers to meet the Asian giant’s ever-rising import and export demands can be expected to increase steadily year after year, as well. This constant economic growth must be funded by continuous investment into shipping containers, infrastructure, and port-side equipment.
Alternative Investment Outlook For 2016
Growing increasingly appealing since 2012, the allocation of alternative investments in portfolios is expected to continue to increase year-over-year. In fact, PriceWaterhouseCoopers has forecast that investor adoption of alternatives will grow approximately 10 percent per year, ultimately reaching a value of $13 trillion by 2020.
The most popular reason for this steady investor migration from traditional investments, like stocks and bonds, is that alternative investments have consistently proven that they can satisfy an investor’s need for diversification and help them reach investing goals. Given that they tend to exhibit a much lower correlation and behave differently than traditional investments, thereby limiting the impact the sudden drop in value of one investment would have on the whole portfolio, alternatives investments – like real estate, shipping containers, gemstones, and precious metals – are commonly recommended to diversify a portfolio.
Investors need to be aware that historically, alternative investments have offered much better risk-adjusted returns than traditional asset classes. In doing so, they have consistently outperformed traditional investments, while experiencing lower volatility. The international investment community can expect that this trend of positive alternative investment returns will continue throughout 2016.