|
The Growth
of Alternative Investment
'Alternative
Investment' is one of those terms which is easier to
define by saying what it is not, than by saying what
it is.
The investment
opportunities on offer to the average, moderately well-off
person living in a developed country are limited by
the regulatory structures of the country one lives in,
by lack of knowledge on the part of financial intermediaries,
and to some extent by fear of the unknown. Thus: stock
exchange investment becomes more awkward the further
afield one tries to invest; many types of offshore fund
cannot be marketed at all in most high-tax countries;
and private banking is felt as intimidating or elitist
by many people, although this is less the case nowadays.
The investment
options tend to narrow themselves to local stock-markets,
funds which conform to tight investment guidelines,
and the savings products of high street financial institutions.
Alternative
investment can be defined as everything else.
Various
processes have tended to broaden the range of accessible
investment options over the last ten years:
- In most
countries, domestic financial liberalisation has encouraged
a more competitive atmosphere.
- In Europe
in particular, the growth of the EU single market
has forcibly demolished exchange and capital controls,
and has again increased the level of competition in
financial products.
- Increasing
financial sophistication on the part of investors.
- Finally,
and most importantly, the Internet has provided financial
institutions with the ability to offer their products
directly to retail customers, by-passing geographical
restrictions for the most part.
Alongside
this increase in accessibility, there has been a parallel
increase in diversity, particularly in investment or
mutual funds. Twenty or thirty years ago, funds were
little more than staid ways of investing in local stock
markets without the hassle of going through a grand
(and expensive) stockbroker. While such funds still
exist, they are outshone, particularly for 'alternative'
investors, by a vast array of fund instruments based
on property, emerging markets, derivatives, bonds, pop
stars' earnings etc etc. It's almost: you name it, and
there's a fund.
Ownership
techniques have blossomed along with the instruments
themselves. There is now a very wide choice of jurisdiction,
of structures within jurisdictions, and of regulatory
frameworks to suit all purposes.
All this
diversity gives choice, but in itself it becomes a problem.
How can an investor, or within limits even an advisor,
know enough about the available choices to make the
right decision in a particular case? All too often,
a particular advisor, or a particular provider, will
give advice which, while not necessarily bad, is self-serving
and imperfect.
Information
providers exist to fill that gap, but even they can
often be partisan. In our Information
Providers section, we list a number of information
sites, with comments from users and from our own analysts;
and in our DIY Guide to Investment,
we try to correlate different types of investment with
different types of investors and their differing residential
situations.
|
