5 Best Alternative Investment Funds

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Contributor, Benzinga
July 19, 2022

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Depending on who you listen to, the stock market’s recent free fall could be just the start of a sustained downturn in the economy. Some people are predicting a long and difficult recession. It’s not hard to see why. Inflation is at record levels in both the United States and Europe. There is a war in Ukraine, which is a major supplier of grain to much of the world. 

At times like these, many investors make for the exit doors from Wall Street and start looking for alternative investments. However, if you’re not someone with special knowledge or expertise, picking the right alternative investment can be hard. That’s why your best bet might be an alternative investment fund. 

What are Alternative Investments?

Alternative investments are classified as investment opportunities aside from stocks and bonds. Examples of popular alternative investments include the following:

Alternative Investment Funds to Consider

Alternative investment funds are diversified bundles of investments into one or more alternative investments. The contents of the fund are usually vetted and selected by a seasoned fund manager who has a solid track record of generating profit for investors. However, they are not guaranteed to make money. 

So, before investing in any fund, you should consider the risks and your investment goals very carefully. Below, you will find a short list of some popular alternative investment funds. Each of them will have their own benefits and drawbacks. 

Hedonova Mutual Fund

The Hedonova Mutual Fund is kind of like a high-class Las Vegas buffet. It is a highly diversified mix of a number of different alternative investments. The logic behind the Hedonova fund is that by spreading risk out across a wide range of alternative investments, the fund maximizes investor profit potential while minimizing the risk that comes with putting all your money in one basket. 

Investments included in the Hedonova fund include:

  • Real estate 
  • Equities
  • Startups
  • Cryptocurrency
  • Wine 
  • Collectibles
  • Non-fungible tokens (NFTs)
  • Art

The minimum investment for Hedonova is $5,000, and it’s currently averaging an internal rate of return (IRR) of 38.7% and outperforming the S P 500 by 15%. This fund also has no minimum hold period and no liquidation fee if you want to divest. It’s a good place to start your search for an alternative investment fund. 

Crowdstreet C-Reit I

Real estate is maybe the most venerable and respected alternative investment out there. Not only does it offer investors the chance to make passive income, real estate also creates additional profit potential through appreciation on the asset itself. That’s why so many institutional investors prefer real estate investment trusts (REITs). 

Crowdstreet’s C-REIT I is just such a fund. The Crowdstreet platform is a well-respected on-line real estate investing platform. It offers individual investments from sponsors, but its C-REIT is an offering of their own making. It includes a group of between 20 and 25 properties that are hand selected by Crowdsteet’s investment team, all of whom are accomplished real estate professionals. 

The C-REIT is only available to accredited investors, but it does accept self-directed IRA contributions. The minimum investment is $25,000 and there is a 5- to 7-year hold period. The C-REIT is projecting an IRR of 15% and offering quarterly distributions. Investors may also receive tax benefits, including write-offs and pass-through income tax reductions on the distributions. 

RealtyMogul Income REIT

RealtyMogul is another real estate investment platform that allows investors to crowdfund carefully selected real estate deals. Like Crowdstreet, it also has its own REIT. The RealtyMogul Income REIT is designed to generate passive income for investors while still giving them the tax benefits that come with real estate ownership. 

The non-traded REIT has a minimum investment of $5,000 and consists of a diverse mix of different income-generating properties. The total value of the properties in the fund is roughly $345 million, and it has been open to investors for nearly six years. In that time, the Income REIT has paid investors between 6% to 8% net profits (not including fees). 

To date, that means Income REIT investors have earned nearly $22,000,000. The fund also pays investors monthly income. So, if you’re looking for passive income, this may be a good place to start. 

RealtyMogul Growth REIT

RealtyMogul has another REIT offering known as the Growth REIT. This fund is more focused on delivering investor returns through property appreciation, although it does generate passive income. However, Growth REIT investors will see most of their dividends when the assets in the portfolio are sold at the end of the hold period. 

This fund has a minimum investment of $5,000 and includes multi-family apartment communities in some of America’s strongest and most recession-resistant real estate markets. The total value of the assets in the fund is $258 million. The pro forma expects an annual net distribution of 4.5%, which is paid on a quarterly basis. 

Up to now, the fund has made those quarterly distributions for 17 consecutive quarters and distributed a total of $7.6 million in investor profits. If you’re looking for a slow, steady fund that has a larger long-term payout, this is one worth considering.

Yieldstreet Prism Fund

Yieldstreet is an on-line investment platform that offers a unique alternative known as the Prism Fund. Much like Hedonova’s mutual fund, the Yieldstreet Prism Fund is built around a diverse mix of different investments that are carefully chosen by the Yieldstreet brain trust. A brief summary of the investments included in Yieldstreet’s Prism Fund appears below:

  • Real estate
  • Private credit
  • Cash
  • Art

Each asset in the fund has its own anticipated yield, and altogether the fund aims for an 8% distribution to investors. Another thing that will appeal to investors about the Prism Fund is a minimum investment of only $500, which is much lower than a lot of its competitors. The Prism Fund currently has $110 million worth of assets under management. 

Although the returns may not be as robust as some other funds, the low buy in and diversified nature of the Prism Fund make it a very investor friendly package. This is especially true for people who are new to alternative funds.

Choose Your Alternative Fund Carefully

Historically, alternative investments have been popular because they have a proven resistance to outside factors such as the performance of the stock market. This quality is especially true of funds that deal with real estate. Everybody needs a place to live and work, which means real estate will continue generating money even if the stock market crashes. 

However, alternative investing carries risk just like all investments do. The best alternative funds try to mitigate that risk through diversification, but that’s no guarantee of profits, and alternative markets have down cycles too. Consult with a financial advisor and consider your investment goals carefully before taking part in any offering. 

The alternative funds highlighted in this article represent a small picture of the available offerings, and their appearance here is not a recommendation as to the viability of any individual fund. Conduct your due diligence and don’t invest more than you can afford to lose. But if you’re looking for a respite from a down stock market, some of these offerings may be right up your alley.

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