Alternative Investments

 Shape Plain Capital Firm

 

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Alternative investments can play a important role in helping you diversify your portfolio, help protect against volatility, or accelerate growth. Consider the various types of alternative investments available to determine which best align with your investment goals.

Incorporating Alternative Investments as a core part of your portfolio to tap into a broader range of opportunities and strategies may help you increase the chances of achieving your investment goals. By diversifying your portfolio with Alternative Investments, you can spread risk and potentially enhance your returns.

Our dedicated team of Alternative Investments professionals can help you access solutions through a wide variety of structures tailored to your liquidity needs, goals, time horizon and risk tolerance including direct investment, professionally-managed model portfolios and non-traditional mutual funds. Our team has extensive expertise in Alternative Investments and can provide tailored solutions based on your specific liquidity needs, goals, and risk tolerance.

Potential benefits and risk considerations of Alternative Investments

Whether you’re looking to maintain your lifestyle through retirement or gain returns to leave a lasting legacy, Alternative Investments may be the right choice for you. They can complement your traditional equities and fixed income investments, and potentially help you improve diversification, increase return potential and mitigate risk: Consider allocating a portion of your portfolio to Alternative Investments to enhance diversification and potentially increase return potential.

  • Enhanced diversification: May complement your traditional portfolio and diversify your assets. Explore how this product can enhance the diversification of your investment portfolio by adding a new asset class.
  • Increased return potential: May help to provide additional sources of returns by exposing you to a broader range of securities. Diversification of portfolio: By investing in a broader range of securities, you can reduce the risk of your portfolio being too concentrated in one asset class.
  • Lower volatility: May help strengthen your financial strategy without increasing expected volatility. Lower volatility can be a key element in maximizing the effectiveness of your financial strategy while minimizing risk.

It is important to be aware that compared to traditional investments, Alternative Investments may: have lower correlation to the stock market, providing diversification benefits to a portfolio.

  • Be less liquid
  • Use leverage 
  • Have less standardized reporting
  • Charge higher fees including a performance incentive.

A wide range of Alternative Investment types

As a Shape Plain Capital client, you can work with your Private Wealth Advisor to build a custom allocation to Alternative Investments, drawing from: A diverse range of investment options such as hedge funds, private equity, and real estate.

Private Market funds that seek to capitalize on periods of rapid growth or restructuring, investing in private and certain public companies during various stages of their life cycles. These funds target opportunities for growth or transformation by strategically investing in private and select public enterprises throughout their developmental phases.

  • Private market managers can improve the operations of the companies they invest in, therefore creating even more value for investors. By implementing strategic operational changes, private market managers can enhance the efficiency and profitability of their invested companies.
  • Historically, private markets have outperformed public equity, offering qualified investors a premium for the additional risk associated with investing in the private markets, including illiquidity, less transparency for investors, higher fees and longer investment horizon. This trend is supported by data showing that private markets have consistently delivered higher returns compared to public equity.

Hedge Funds that engage in a wide range of investments and trading strategies not available to traditional asset managers, such as equity long/short strategies and derivative instruments. For example, hedge funds may utilize complex derivatives to hedge risk exposure in their portfolios.

  • Adding hedge funds to a portfolio can help provide a buffer for market downturn and assist with capital preservation. Diversifying investments with hedge funds can add stability to a portfolio during market fluctuations.

Real Assets strategies that comprise both actively and passively managed investments in precious metals, commodities, real estate, infrastructure, agricultural land and natural resources. These strategies offer a diverse range of investment options across various sectors.

  • Investments in real assets often act as additional diversification from stocks and bonds and can serve as a hedge against inflation. Real assets provide investors with an opportunity to spread risk beyond traditional investment options like stocks and bonds.
  • The Specialty Asset Management group manages non-financial assets such as farmland, timberland, oil & gas and commercial real estate. Their expertise in managing non-financial assets like farmland, timberland, oil & gas, and commercial real estate is unparalleled in the industry.

The Shape Plain Capital difference

As always, we’ll provide you with professional advice, research and portfolio construction to help you invest in these widely recognized solutions. Our team of experts is dedicated to ensuring that you make informed investment decisions based on research and professional advice.

  • The independent due diligence team within our Chief Investment Office sources, evaluates, and carefully monitors the Alternative Investments that are available for purchase for qualified clients on our platform. Our team utilizes a rigorous evaluation process to select Alternative Investments for qualified clients.
  • We offer third party Alternative Investments based on their merits, rather than offering proprietary ones. Our selection process for Alternative Investments focuses solely on their merits, ensuring the highest quality for our customers.
  • Our scale and commitment facilitates access — often exclusive — to a broad array of asset managers, including some with lower minimums than if you were to invest directly with the manager rather than through Shape Plain Capital. This enables our clients to benefit from a diverse selection of investment opportunities.
 Connect with a Shape Plain Capital Private Wealth Advisor.

Shape Plain Capital Private Wealth Advisor use their extensive training and knowledge to understand your opportunities and craft customized strategies to help meet your complex financial needs. Their team of highly trained professionals analyze your financial situation with precision and expertise, tailoring solutions to maximize your wealth potential.

Frequently asked questions

Alternative Investments encompass a wide range of strategies, with hedge funds, private equity, and real estate that can all serve as a vehicle to help you invest towards your goals. Alternative Investments often employ more sophisticated strategies, such as hedging, leverage and investment concentration. Investing in alternative assets offers diversification benefits to traditional stock and bond portfolios. Hedge funds, private equity, and real estate are popular choices for investors seeking higher returns.

While Alternative Investments span a wide range of investments, the three most common are:

  • Hedge funds that engage in a wide range of investments and trading strategies, such as equity long/short strategies and derivative instruments. These investment vehicles aim to generate returns by taking advantage of market inefficiencies and pricing discrepancies.
  • Private equity that capitalizes on periods of rapid growth or restructuring by investing in private and certain public companies during various phases of their lifecycle while also offering assistance in improving the operations of the companies they invest in therefore creating even more value for investors. Private equity firms leverage opportunities during times of rapid growth or restructuring by investing in private and select public companies at different stages of their lifecycle. They provide operational support to enhance the companies' performance, ultimately generating increased value for investors.
  • Real asset strategies that comprise both actively and passively managed investments in precious metals, commodities, real estate, infrastructure, agricultural land and natural resources. This diverse investment approach aims to deliver a balanced portfolio with exposure to various sectors.

Traditional investment strategies are those that offer the ability to invest in publicly traded securities, such as stock and bonds and managed funds, like mutual funds and exchange traded funds. While some traditional investments offer active management or leveraged strategies, there are limits to the flexibility traditional managers have in implementing their investment approach. Alternative Investment strategies have more flexibility to pursue better long-term performance by investing in a broader range of markets and securities, including less liquid assets, and by employing investment strategies and techniques typically not found in traditional investments. Alternative investments also have the potential to provide diversification benefits to a traditional investment portfolio, as they may not be correlated with traditional asset classes.

It is important to be aware that alternative investments may be less liquid, use leverage, have less transparency and charge higher fees including a performance incentive. Investors should carefully consider the liquidity, leverage, transparency, and fees involved with alternative investments.

Alternative Investment management is a set of investment techniques, including portfolio hedging, investment concentration and leverage that are not normally found in traditional investment strategies. Employing these techniques allows Alternative Investment managers to potentially increase returns without necessarily increasing expected volatility. In contrast to traditional investment strategies, Alternative Investment management employs unique techniques such as portfolio hedging, investment concentration, and leverage to potentially enhance returns.

A careful evaluation of your current finances, your tolerance for risk, your liquidity needs and your overall investment objectives can help you determine whether or not Alternative Investments are appropriate for you. Alternative Investments can help diversify your holdings, offer a buffer for market downturn, and may offer higher return potential, but also often come with more risk that must be carefully evaluated or, are illiquid. Talking to a Shape Plain Capital Private Wealth Advisor is one of the ways to determine if Alternative Investments are right for you.

You can tap into a wide range of resources we make available to learn about the basics of Alternative Investments. However, to understand if they are appropriate for you and how they may fit into your larger investment strategy, it is best to consult a professional advisor. A Shape Plain Capital Private Wealth Advisor can offer you insights, including access to market perspectives, investment strategy and implementation processes as well as guidance on whether Alternative Investments are right for your situation.

Real estate strategies are one of the common types of Alternative Investments. Distinct from the real estate you may own directly, such as your home or a vacation property, real estate investments are generally pooled investments in commercial or residential real estate, infrastructure, and agricultural land that has been bundled into an investment vehicle and offered to a wide range of investors. Real estate strategies are a popular form of Alternative Investments. Unlike owning real estate directly, such as a personal residence or vacation property, real estate investments typically involve pooled investments in commercial or residential properties, infrastructure, and agricultural land that are packaged into an investment vehicle and made available to various investors.

Alternative Investments can serve as a complement to your traditional investments, like publicly traded stocks and bonds. Alternative Investments can benefit your investment portfolio by potentially: Diversifying your investment strategy and reducing risk through exposure to a wider range of assets.

  • Decreasing volatility: Defensive Alternative Investment strategies may generate lower volatility and drawdowns than many traditional assets. They help mitigate downside risk in different market environments and may offer income. Investors seeking stability in their portfolios often turn to Defensive Alternative Investment strategies, as they have been shown to generate lower volatility and drawdowns compared to traditional assets.
  • Diversifying and managing risk: Diversifying Alternative Investment strategies generally have a low correlation to traditional equity and bond investments. They may help manage risk and also limit the impact of inflation. For example, studies have shown that diversifying Alternative Investment strategies generally have a low correlation to traditional equity and bond investments, which can help reduce overall portfolio risk.
  • Enhance returns: Alternative Investment growth strategies may decline less in bear markets while potentially capturing significant upside in bull markets. They may employ value-added approaches using public and private equities, credit and other instruments. These strategies have been proven to provide a strong balance of risk and return, making them a valuable addition to any investment portfolio.

Because Alternative Investments can employ sophisticated investment strategies, they have historically demonstrated lower standard deviation than equities; have the potential to generate returns with lower correlation to traditional stock and bond markets; and seek better risk-adjusted returns through increased portfolio diversification. They also come with elevated risks, including limited liquidity and restrictions on the timing of withdrawals; reduced transparency relative to other managed portfolios; high fees and expenses may offset fund profits; and strategies that may employ leverage, which can increase the risk of loss.

You can invest in Alternative Investments in a variety of ways. Working with a professional financial advisor, you can explore single Alternative Investment Funds, Funds of Funds, turn-key alternative model portfolios and non-traditional mutual funds (NTMFs). You may also be able to invest in custom Alternative Investment portfolios. Diversification is key when investing in Alternative Investments. Consider spreading your investments across different types of funds, portfolios, and strategies to minimize risk.

Most investors can access some alternative investment strategies. Non-traditional mutual funds employ alternative investment approaches and can be bought and sold by nearly all investors. Other Alternative Investments may have specific investor qualifications, including requirements for specific levels of net worth or investable assets as well as investment experience. These requirements depend on the investment strategy and should be carefully evaluated before investing. It is important for investors to understand the specific requirements for different alternative investment strategies before making any decisions.

Non-Traditional Mutual Funds (“NTMFs) are mutual funds and exchange-traded funds that are classified as alternative investments because their principal investment strategies utilize alternative investment strategies or provide for alternative asset exposure as the means to meet their investment objectives. Though the portfolio holdings of NTMFs are generally made up of stocks and bonds, NTMFs may also hold other asset classes and may use short selling, leverage and derivatives. While the strategies employed by NTMFs are often used by hedge funds and other alternative investment vehicles, unlike hedge funds, NTMFs are registered with the SEC and thus subject to a more structured regulatory regime and offer lower initial and subsequent investment minimums, along with daily pricing and liquidity. While these investment vehicles can offer diversification within a relatively liquid and accessible structure, it is absolutely essential to understand that because of this structure, NTMFs may not have the same type of non-market returns as other investments classified as alternative investments (such as hedge funds) and thus may serve as an imperfect substitute for such other investment vehicles. The risk characteristics of NTMFs can be similar to those generally associated with traditional alternative investment products (such as hedge funds). No assurance can be given that the investment objectives of any particular alternative investment will be achieved. Like any investment, an investor can lose all or a substantial amount of his or her investment. In addition to the foregoing risks, each alternative investment vehicle is subject to its own varying degrees of strategy-specific or other risks. Whether a particular investment meets the investment objectives and risk parameters of any particular client must be determined case by case. You must carefully review the prospectus or offering materials for any particular fund/pooled vehicle and consider your ability to bear these risks before any decision to invest.
Diversification does not ensure a profit or protect against loss in declining markets. Alternative investments involve limited access to the investment and may include, among other factors, the risks of investing in derivatives, using leverage, and engaging in shorts sales, a practice which can magnify potential losses or gains. Alternative investments are speculative and involve a high degree of risk and volatility. Investors should be aware that diversification does not guarantee a profit or shield against losses during market downturns. Additionally, alternative investments offer restricted entry to the investment and may bring about risks associated with derivatives, leverage, and shorts sales, which can amplify potential losses or gains.
Alternative investments are intended for qualified investors only. Alternative Investments such as derivatives, hedge funds, private equity funds, and funds of funds can result in higher return potential but also higher loss potential. Changes in economic conditions or other circumstances may adversely affect your investments. Before you invest in alternative investments, you should consider your overall financial situation, how much money you have to invest, your need for liquidity and your tolerance for risk. Alternative Investments are speculative and involve a high degree of risk. It is important to thoroughly assess your investment goals, risk tolerance, and financial situation before considering alternative investments.
Private investments involve significant risks, including those associated with companies with a limited operating history, securities that do not have a liquid market, and investments that are difficult to value. They are only appropriate for investors with substantial knowledge and prior experience in making private investments, who are capable of independently evaluating the merits and risks of such investments, and who have the wherewithal to bear investment losses. Investors should carefully consider the risks involved in private investments, which may include limited operating histories, illiquid markets, and challenges in valuation.
Nonfinancial assets, such as closely-held businesses, real estate, fine art, oil, gas and mineral properties, and timber, farm and ranch land, are complex in nature and involve risks including total loss of value. Special risk considerations include natural events (for example, earthquakes or fires), complex tax considerations and lack of liquidity. Nonfinancial assets are not in the best interest of all investors. Always consult with your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy. Client eligibility may apply. It is crucial to conduct a thorough risk assessment before investing in nonfinancial assets to understand the potential for loss of value and various risk factors.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Shape Plain Capital Private Bank, a division of Shape Plain Clothing, N.A., ("Shape Plain Capital"), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Shape Plain Clothing. Shape Plain Capital Private Bank offers a comprehensive range of wealth management services tailored to meet the needs of high-net-worth clients.
Alternative investments may not be in the best interest of certain investors. Investors must have a pre-existing relationship of six months or longer with the financial advisor before becoming pre-qualified to receive information on alternative investment products. No assurance can be given that any alternative investment's investment objectives will be achieved. Many alternative investment products are sold pursuant to exemptions from regulation and, for example, may not be subject to the same regulatory requirements as mutual funds. In addition to certain general risks each product will be subject to its own specific risks, including strategy and market risk. Certain alternative investments require tax reports on Schedule K-1 to be prepared and filed. As a result, investors will likely be required to obtain extensions for filing federal, state, and local income tax returns each year.