Best Alternative Investment Funds UK to Watch
Many investors in the UK are turning to alternative asset classes as a means to target higher financial returns. As alternative investments are considered to be riskier than traditional assets like blue-chip stocks and bonds – it’s a potential opportunity to factor in, when planning to diversify your funds.
In this guide, we review some of the Popular Alternative Investment Funds UK.
Popular Alternative Investment Funds UK List
Check out some popular alternative investment funds UK below. If you don’t have time to read this comprehensive guide in full. We review each fund in great detail further down.
- SPDR Gold ETF
- Real Estate Select Sector SPDR Fund
- Vanguard Emerging Markets Index
- NewRiver REIT
- eToro CryptoPortfolio
Popular Alternative Investment Fund to Invest in Reviewed
In choosing the popular UK alternative investment funds for your financial goals – there are many considerations that need to be made.
For example, what type of alternative investments will your chosen fund provider give you access to and what fees does it charge. You also need to factor in past performance and how much risk is involved with the alternative investment fund in question.
Taking these considerations into account, we are going to review 5 alternative investment funds in the UK.
1. SPDR Gold ETF
The first alternative investment fund that you might want to think about is that of the SPDR Gold ETF. As the name suggests, this alternative investment fund is focused exclusively on gold. This is a classic example of an alternative asset – as you will be investing in a market outside of traditional stocks and bonds.
This alternative investment fund is backed by physical gold – meaning that your capital will reflect the global market price of this precious metal. That is to say, if gold increased by 10% in the space of four weeks – as will your investment. Like some of the popular ETFs, there will always be a slight variation between market growth and investment returns – as you need to take into account fees.
With that said, this alternative investment fund is one of the cheapest in the UK market – with SPDR charging just 0.40% per year. This means that a £5,000 investment would cost you just £20 annually in fees.
In terms of past performance, this alternative investment fund has mirrored the global value of gold pretty much like for like since its inception in 2004. For example, the spot price of gold has increased by 9.76% in the three years prior to writing this page. In comparison, the SPDR Gold ETF has grown by 9.32%.
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2. Real Estate Select Sector SPDR Fund
Real estate is another potential option when it comes to alternative investments. As a retail investor, a popular way to access this marketplace is via an alternative investment fund. In particular, Real Estate Select Sector Fund offered by SPDR is one way to do so.
In a nutshell, this alternative investment fund will allow you to gain exposure to various US real estate markets. In fact, the fund itself contains 29 large-cap stocks that are directly involved in the American property industry. This covers multiple sectors – such as commercial property, essential units, office blocks, retail space, and healthcare facilities.
To give you an idea of how this alternative investment fund is balanced – 12% and 9% holding in American Tower Corporation and Prologis, respectively. There are also holdings in Welltower, Simon Property Group, Digital Realty Trust, and Equinix. Although you are gaining access to a wide variety of real estate stakeholders – SPDR charges just 0.12% per year on this fund.
This allows you to diversify into the US property scene without getting hammered by expense commissions. In terms of past performance, this alternative investment fund has generated some attractive returns since it was launched in 2015. This works out at an average annualized return of 7.81%. 3-year returns are even more favorable at 11.12% annually.
3. Vanguard Emerging Markets Stock Index Fund
Although stocks listed in the UK, US, Europe, and other major markets are not considered an alternative investment – this is most definitely the case with equities based in the emerging economies. After all, you will be gaining exposure to companies that operate in high-growth marketplaces – so both the risks and rewards are going to be much higher.
If you like the sound of allocating some capital to Asia, South America, Africa, and other illiquid markets – there are several alternative investment funds to choose from. With that said, we like the look of the Vanguard Emerging Markets Stock Index Fund for its diversified approach.
Put simply, this Vanguard fund will get you access to over 1,400 companies from a variety of regions and economies. In the Asian markets, this includes everything from China, the Philippines, Indonesia, Thailand, Malaysia, South Korea, India, and Taiwan. In South Africa, you’ll be gaining access to companies in Brazil, Chile, Colombia, and Peru.
There are also stock holdings in the Middle East, Africa, and a number of emerging European states – like Hungary. Although Vanguard gives you access to dozens of emerging economies – you might be surprised to learn that the expense ratio on this alternative investment fund is just 0.23% per year.
Vanguard has appointed a risk rating of 6/7 on its Emerging Markets Stock Index Fund – so you may want to keep your stakes conservative. In terms of performance, returns have been significant since the fund was launched in 2009. This works out at cumulative total gains of 174% – and 100% over the past five years alone.
4. NewRiver REIT
NewRiver is behind a real estate investment trust (REIT) – which firmly sits within the category of an alternative asset class. This is because the firm will invest in UK-based properties from within the retail sector. In fact, NewRiver also develops new projects and manages the end-to-end process of vetting tenants and collecting rental payments.
At the time of writing, this alternative investment fund is behind a real estate portfolio in excess of £1.4 billion. This includes a variety of pubs and bars, shopping centers, warehouses, and high-street shops. Although the UK retail sector is still in dire straights as per the impact of the pandemic – this investment fund has performed well in recent months.
For example, in the six months prior to wiring this page – the fund was priced at £50.60 on the London Stock Exchange. And today – the same fund is priced at £93.80. This translates into 6-month returns of over 85%.
Note: This alternative investment fund is listed on the London Stock Exchange. As such, you will need to pay a 0.5% stamp duty tax when you make a purchase.
5. eToro CryptoPortfolio
Much like real estate, gold, fine art, and emerging market equities – cryptocurrencies are a popular alternative asset class with UK investors seeking above-average returns. The key problem is that digital currencies operate in a highly speculative and volatility-driven market, so the risks are considerable.
This is why it is worth considering a diversified portfolio that is managed by an experienced third party. One way to do so is with eToro’s ‘CryptoPortfolio’. As the name suggests, this consists of a diversified portfolio of crypto assets. Most importantly, the portfolio is professionally managed by eToro – so you have the option to invest in a 100% passive nature.
Look at the CryptoPortfolio in more detail, we can see that 25% is allocated to Bitcoin – which is still the de-facto digital coin of choice. There are also holdings in Ethereum, Cardano, IOTA, NEO, ZCash, Litecoin, Bitcoin Cash, Stellar Lumens, and more. The team at eToro will look to reweight and rebalance the portfolio in line with market conditions.
That is to say, there is more allocation of capital to cryptocurrencies with a higher market valuation. The CryptoPortfolio at eToro also takes no fees or commissions. The main drawback is that you need to meet a minimum investment o $5,000 (about £3,500). Crucially, the CryptoPortfolio has generated returns of 478% over the past 12 months.
What are Alternative Investment Funds?
Alternative investments are generally considered to be asset classes outside of the traditional stock and bond markets. There are many examples that fall within the remit of an alternative investment – such as real estate, interest rates, private equity startups, hedge funds, gold, silver, and futures. Additionally, alternative investments can also include digital currencies like Bitcoin, fine art, and even rare whiskeys.
The key attraction of alternative investments is that they often allow you to target above-average returns. Additionally, many alternative investments – such as cryptocurrencies and fine art – have no correlation to the health of the wider stock markets.
This allows you to diversify your portfolio and avoid being overexposed to a potential market crash. With that said, alternative investments carry much more risk than conventional bonds and blue-chip stocks.
Popular Alternative Investment Funds UK Brokers
In order to invest in the popular UK alternative investment funds from the comfort of your home – you will need to do this through a trusted stock broker. There is a wide selection of trading platforms in the UK that offer such a service – albeit, you need to focus on key metrics like fees, commissions, supported markets, and regulatory bodies.
eToro offers a huge selection of alternative investment funds – many of which we have discussed on this page. For example, you can easily invest in the SPDR Gold ETF, Real Estate Select Sector SPDR Fund, and the Vanguard Emerging Markets Stock Index Fund at the click of a button.
This brokerage site is now home to over 26 million investors – not least because it allows you to gain exposure to the financial markets in a super low-cost manner. In fact, eToro is a commission-free trading platform – so you have the option to purchase and sell investment funds without paying any dealing fees. Additionally, if the alternative investment fund is listed on the London Stock Exchange, eToro waivers stamp duty tax.
This saves you an additional 0.5% on your investment. The minimum stake of investing in eToro is only $10. As such, an account balance of $100 would allow you to invest in 10 different alternative investment funds – ensuring that you are well-diversified. eToro is also behind a popular CopyPortfolio that gives you access to the cryptocurrency industry.
The fund contains a wide variety of digital coins that are weighted based on recent performance and market capitalization. The CopyPortfolio in question has generated returns of over 478% in the last year and eToro charges no commissions or fees. To get started at eToro, you’ll need to quickly open an account and deposit some funds with a debit/credit card, e-wallet, or bank account transfer. eToro is authorized and regulated by the FCA and your capital is covered by the FSCS scheme.
We should also note that eToro offers a lot more than just alternative investments. On the contrary, the platform gives you access to over 2,400 shares from 17 UK and international stock exchanges. Users can also invest in more than 250 ETFs and 16 digital currencies. If you’re an experienced investor, you might also be interested in trading hard metals, CFD futures, energies, forex, and indices. All of the aforementioned markets are also commission-free at eToro.
|Stock Broker||Minimum Deposit||Fractional Shares?||Pricing System||Cost of Buying Stocks & Funds||Fees & Charges|
|eToro||$10||Yes – $10 minimum||0% commission on ALL real stocks, spreads for CFDs||Market spread is not included when buying real stocks||No Deposit fees, $5 withdrawal fee, $10 inactivity fee, no account management fees.|
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This guide has covered the many features of allocating some capital into an alternative investment fund. Not only will you be able to hedge your investments against the traditional markets, but alternative asset classes offer the potential of above-average returns. Plus, when opting for an alternative investment fund – you’ll have access to a diverse portfolio of financial instruments.
On the other hand, it is important to note that there is risk involved in every trade you partake in. This is why, you should conduct your own due-diligence and research for every ETF, prior to opening a trade.