By Kate Saines
Forget stocks, shares, bonds, oiecs and investments trusts – if you really want to understand exactly what you are investing in there are some truly unusual but very interesting assets out there.
While a financial adviser will probably tell you it’s essential to have a range of stock market investments in your portfolio, perhaps a bit of cash, they might also tell you that alternative investments provide a way of diversifying.
They don’t have to be high risk, they can complement a hobby or interest and they may even make you some superb returns.
Asset classes and investment vehicles like property, hedge funds, private equity and commodities are the more traditional alternative investments.
But there are a whole range of interesting, unusual and downright bizarre places to put your cash which you might not have considered before.
So, whether you are a novice investor looking for something interesting to invest your cash into, or a more experienced investor keen to diversify, or just fascinated by the array of places others put their cash – here’s our guide to some very alternative investments.
Ever fancied owning a prime cut of England’s (or the UK’s) green and pleasant land? Well, thanks to the Forestry Commission’s consistent and regular activities in selling off its produce, you can be the proud owner of some of this nation’s woodland.
The buying and selling of our forests is big business. It’s one where demand exceeds supply and where the government – even though it back-tracked on plans to sell of large areas of woodland – is still able to sell off 15 per cent of England’s woodland in each four-year public spending period, so there could be even greater opportunities to invest in future.
It is commercial forests – the type found further towards the north of UK consisting of pine trees and the like – where the investment opportunities lie.
They have a life span of around 40 years, after which they are chopped down to create timber and then more are replanted.
To invest in a large enough plantation of trees to make any money you would need to have at least £300,000 to invest.
However, the private investor can get a stake in this growing asset class by taking advantage of one of the UK’s forestry funds.
Stellar Asset Management runs a closed-ended investment vehicle – a bit like an investment trust – which allows people to get exposure to a range of forests.
Jonathan Gain, chief executive of the firm, said figures compiled by the IPD UK Forestry Index show that, over 17 years, a total return of 5.6 per cent has been made.
It might not sound like a high return, but this is only part of the story. According to Mr Gain, there are major tax advantages to the investment.
If you own the investment for two years, it will not be hit with inheritance tax. What’s more it’s free of capital gains tax and income tax.
So while the return is modest, the long-term benefits will bring the eventual gain up to the standards of some riskier investments.
Mr Gain said: “It’s a low risk, asset backed investment. You would need to find an investment that generated 11 per cent returns to make it comparable.”
If you are interested in this kind of investment you will need at least £15,000, as this is the minimum Stellar accepts into its fund. There are also management charges and fees.
Having all your cash in a few lumps of gold bullion certainly sounds impressive. Investing all your hard-earned money in some lumps of silver really doesn’t have the same ring.
But according to Lloyds TSB silver is set to be the best performing precious metal in 2011 – so perhaps it’s time to ditch the gold.
In 2010, Lloyds TSB economists have revealed, the price of silver soared by 80 per cent, which was more than two and half times the rise in gold, which went up by just 29 per cent.
The reasons for its increasing popularity are in part down to the fact that is it a ‘safe haven investment’ said Lloyds TSB, but also because of pressures on the supply and high demand for its use industrially.
This trend has continued into 2011, rising in price by 9.3 per cent over January and February.
Suren Thiru, economist for Lloyds TSB, said: “Silver continues to outshine gold and platinum with the relatively low value of silver providing greater scope for larger gains as well as offering investors similar benefits to those of gold.”
Investing in wine doesn’t have to mean notching up a hefty tab down your local. Nor does it necessarily mean owning a cellar full of dusty vintages.
Fine wine has over the years become a popular asset class in its own right and there are products which allow investors to benefit from its rising prices.
Fine wine investment house, Premier Cru, offers various portfolios and savings plans which allow customers to invest.
Its capital investment plans require a minimum investment of £10,000 but there are monthly investment plans which need £5,000 initial investments with £175 per month deposits.
Premier Cru hails fine wine as a more stable investment than its more traditional counterparts because it is not affected by fluctuating markets, recession or interest rates.
It said it benefits from being tax free, consumable, low risk and portable.
Meanwhile, the Bordeaux Index, the monthly report on the state of the fine wine investment market, reveals wine prices rose by 3.7 per cent in February.
Compared to crude oil, which rose by 12 per cent and gold, which went up 7.7 per cent in February, it might not look such a good bet.
But Bordeaux Index founder and managing director Gary Boom, said this needs to be looked at in context. He said the instabilities in the Middle East and North Africa were responsible for the rise in oil, while investors used gold as a risk insurance for portfolios.
Long term the figures look more impressive – over the last year fine wine prices went up by 30 per cent and for each of the last 15 years the average annual gain was 15 per cent.
Mr Boom added: “Stripping away the impact of these unheralded events in the Middle East and North Africa the performance of fine wine continues to impress.
“The gains investors are enjoying are well above twice those gained on equity markets – further proof that the sector has become a cog in a much larger machine.”
So what’s the outlook? Apparently everything is heading towards a small but exceptional vintage for Bordeaux.
Mr Boom added: “The 2010 prices could well exceed last year’s records but ultimately the prices will be affected by outside, wider issues affecting a range of investment options.”
The big screen
The thought of financing a film might sound so fantastical that it might as well be the plot of a movie itself.
But take out the glitz and glamour of the big screen and you’ll realise that pretty much every movie ever made cannot get off the ground without vital cash input from someone.
And that someone could be you.
Recently the film industry has seen a shift towards more independent film producers – as opposed to distributors – making their own films.
As a result private investors are set to play a bigger role in funding these films. What’s more, after the British Film Council was dissolved the need for private investment in British films has become even more essential.
Eddie Charlton, a private banker and film investor, is one person who has started putting his cash into this area.
He has been involved with financing Gosford Park, The Pianist and Cliffhanger to a new but a few.
His most recent venture, a film called Archipelago, which has just been commended in the Best Film category at the British Film Institute’s London Film Festival, has taken him from investing to producing.
But you don’t need a background in film to invest. There are a growing number of film funds available for private investors. If you speak to a financial adviser, they will be able to point you in the right direction.
Mr Charlton said that while traditionally investors have been persuaded to invest in films for the wrong reasons – such as the tax shelter they provide – this is not the only benefit.
A spokesperson for Mr Charlton said: “Eddie likes to help structure film financings where investors make a decent return on their money – they are of course allowed to have some fun.”
There are risks in this industry – it’s very hard to quantify the kind of return you’ll receive as this will be linked to a film’s profitability. According to Mr Charlton’s spokeswoman, “film making is an art not a science”.