A recent extract from Travis's book "Grow Your Wealth Faster with Alternative Assets" recently appeared in The Australian.

Titled "Alternative Assets Are Not Just For Big Super Funds, There Is A Pathway For Every Investor" the article looked at investment strategies for investors particularly interested in investing in alternative assets.

Investing is not easy, otherwise … everyone would be doing it. But a sound investment strategy will minimise your risk and maximise your success – and those principles work just as well when it comes to alternative investments. There are many things you can do in private markets that have less to do with the investment and more to do with the approach. Here’s a strategy for every investor when seeking to balance outcomes in your favour.

Start small: The first time you invest with a particular group, invest less than you want to. Start small, even if they’ve passed every level of your analysis, for example, they’ve got great CVs, you’ve compared them to others, and fees are fair.

Let’s say the investment has a 12-month maturity, and even though you want to put in $40,000, put in half to start with and see what happens. Did you get your first coupon (interest payment)? How was their reporting? Did they provide enough information? Is the asset performing as it was written on the box? If you have a good investor experience, you might want to invest a little more next time.

Interests aligned: Understanding alignment of interest is about ensuring that, if things go badly, someone else loses money or feels pain before you do. The benefit here is that the other person or group of individuals will work hard to ensure they don’t lose money. This reduces the chance of a bad outcome in your investment as they will be focused on protecting their own. Alignment of interest means everyone protects everyone else out of self-interest. That person or group will, out of self-interest, protect themselves from losses, and by default that includes protecting you because they’re subordinate to you in some way.

Watch monetary incentives: Monetary incentives are another core part of creating alignment, for example, you may want to reserve some of the capital raiser’s profits and not release them until they either perform or give you your money back. Reserving their profits creates an alignment of interest with you because they want the profits for themselves, so they’ll do what it takes to ensure performance. Including this ‘right to reserve’ profits in the documentation gives you extra protection. You should also set performance triggers for when this is enacted and/or released.

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