If you talk to a common investor and ask him about his investment opportunities, he will name bonds, stocks and exchange traded funds. Due to the restrictions when it comes to alternative investments, few investors know about what the term means. Instead, it represents other investments such as real estate investment trusts, hedge funds, private equity and venture capital. Some real assets such as rare coins, precious metals, art, and wines are part of alternative investments. Alternative investment is relegated to accredited institutional investors as well as high net worth persons. Highland Capital Management is a firm based in Dallas, Texas specializing in alternative investments. James Dondero founded the firm with the help of his long-term friend Mike Okada.
Alternative investments are different compared to the traditional forms of investments such as exchange-traded funds and mutual funds. For instance, alternative investments are characterized by strict fee structures and high minimum investments. Because of their rare occurrence, alternative investments are difficult to value and are known to have low liquidity. Their customers are limited and therefore, difficult to sell. For instance, it would be easier to sell shares of an established company other than selling a rare gold coin. Before you decide to invest in alternative investments, you should know some basics about the trade. For this reason, you should seek the advice of a professional like James Dondero who has experience of more than 23 years in the industry. James Dondero will be in a position to advise you about the unregulated nature of the industry making it prone to scams and fraud.
Common forms of Alternative Investments
The term private equity is often misunderstood. Private equities are known to accept funds from institutional and non-institutional investors and then use these funds to finance private companies that look promising. Later on, the funds are returned to the owners upon the end of the deal. To those who don’t understand what private equity encompasses, it includes all money that has been invested in venture capitalism, start-ups and even financing the growth of the selected company.
Venture capital is another form of alternative investments and firms have made billions when things go as planned. Some of the successful companies that have benefited from venture capitalists include Facebook, Twitter, and Google. These capital benefits startups that lack a revenue history but look promising. It’s one of the riskiest asset classes as many start-ups have proven unsuccessful.
This is the most common alternative investment and many that people know. James Dondero and his firm specialize in hedge funds and all it stands for. Like most hedge fund managers, James Dondero uses several hedge fund strategies such as arbitrage, macro-trends and equity long short. He is also known to use the distressed assets strategy. The only difference between venture capitalists and hedge fund managers is that the latter has the freedom to invest in public equities.