High inflation has led to many wanting to diversify their investments away from traditional stocks, bonds and currencies with an increase in demand for alternative assets.
In this blog, we’re going to take a deep dive into the alternative investment market, examine how it’s changed, and look to the future of alternatives.
But first, what is an alternative investment?
An alternative investment is anything that isn’t a stock, bond or currency that may provide some sort of return. So investments in art, real estate, hedge funds, private equity, etc.
Many investors seek out alternative investments because they have a low correlation with the stock and bond markets, so they tend to be less impacted by changes in the market.
The alternative investment market
As the stock and bond markets are currently experiencing the worst decline on record (Business Insider, 2022), investing in alternatives is becoming increasingly popular as investors seek to diversify their portfolio.
Prequin, a leading data provider to the alternative asset community, predicts investments in alternatives will rise to more than $17 trillion by 2025, a 10% annual growth rate from 2020's level.
Investing in the alternatives market
Traditionally, most alternative investments were generally accessible to individuals categorised as high net worth or sophisticated investors.
Plus, some regulatory requirements require individuals to be sophisticated or high net worth investors before giving access to certain investment opportunities.
Digital tokenisation of assets has improved access to the alternative investment market.
The changing landscape
Digital tokenisation has transformed the alternative investment market and helped people invest in assets, like collectables, real estate, fine art and more.
Here’s how it works: A digital share, which represents a fraction of a real-world asset, is issued to investors who essentially co-own the asset, and reap any potential shared benefits (minus any costs incurred).
The digital tokenisation market
The tokenisation market globally surpassed USD 2.3 billion in 2021 and is expected to reach USD 5.6 billion by 2026 (19% CAGR).
The daily trading volume in digital assets globally has grown fivefold from EUR 30 billion in 2020 to EUR 150 billion in 2022. However, this is still tiny in comparison to the total potential of illiquid tokenisable assets in the world.
Head over to the Ctrl Alt app to explore the world of alternative assets today.
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