Alternative investments

An alternative investment is an investment in asset classes other than , bonds, and cash. The term is a relatively loose one and includes tangible assets such as precious metals, art, wine, antiques, coins, or stamps and some financial assets such as real estate, commodities, private equity, distressed securities, hedge funds, carbon credits,venture capital, film production,financial derivatives, and . Investments in real estate and forestry are also often termed alternative despite the ancient use of such real assets to enhance and preserve wealth. In the last century, fancy color diamonds have emerged as an alternative investment class as well. Alternative investments are to be contrasted with traditional investments.

There is a wide variety of literature on alternative investments; however, this term has been used broadly and can also refer to financial alternatives such as derivatives or other alternatives such as energy. It is difficult to find research on the investment characteristics of tangible alternatives such as art or wine due primarily to a lack of good quality data. The Goizueta Business School at Emory University has established the Emory Center for Alternative Investments to provide research and a forum for discussion regarding private equity, hedge fund, and venture capital investments. William Baumol used the repeat sale method in a 1986 paper in The American Economic Review, comparing the prices of 500 paintings sold over 410 years, concluding that the average annual return on art was 0.55% (after taking inflation into account). A master's thesis by Dennis Kundu and Alexander Raza studied the return on investment on high-quality oil paintings sold in Sweden between 1985 and 2016, and found the average return to be merely 0.6% annually.

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