More About Private Investment Vehicles
Characteristics of private alternative investments include:
Access—These investments are often only available to accredited investors or qualified clients (that is, individuals who meet certain net worth, income or asset benchmarks set by the SEC). These investments are usually open to a limited number of investors and typically require a high initial investment.
Fees—Private investment vehicles typically have a 1-2% management and 20% performance fee annually, but may vary widely and could be much higher.¹
Investments—These private investment vehicles generally have the flexibility to use leverage and short sales in greater amounts than mutual funds. While this provides the opportunity for outperformance, there is the potential to lose some or all of the money invested, as investments may not go in the direction anticipated.
Liquidity—Funds may be “locked up” for months or years, making it difficult for investors to access their money
Performance—Most private investment vehicles seek to hedge against downturns in the market and provide positive returns regardless of market conditions. However, it may be difficult to establish appropriate benchmarks for these investment vehicles and thus appriase performance, particularly because managers are typically under no obligation to report returns.
Pricing—Because there are no standards established for pricing these private investment vehicles, it may be difficult to value your investment at any specific time.
Regulation—For private investment vehicles, SEC registration is not required.
Taxes—The tax implications involved in these investments are often unclear and are more complex than other investments.
Transparency—Holdings are only available at the discretion of management.
¹ Source: www.sec.gov
The alternatives strategies and asset classes mentioned are not suitable for all investors. Many alternative strategies use sophisticated and aggressive investment techniques such as leveraging, short selling and derivatives. The more you invest in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. The use of short selling involves increased risks and costs. You risk paying more for a security than you received from its sale. Theoretically, stocks sold short have the risk of unlimited losses. The use of derivatives such as futures, options and swap agreements may expose an investment to additional risks that it would not be subject to if you invested directly in the securities underlying those derivatives. Additionally, certain alternative strategies tied to hard assets such as commodities, currencies and real estate, may be subject to greater volatility as they may be affected by overall market movements, changes in interest rates or factors affecting a particular industry, commodity or currency, –such as droughts, floods, weather, livestock disease, embargos, tariffs and international economic, political and regulatory developments. No investment strategy can guarantee a return in a declining market. Additionally, an investor could lose all or a substantial amount of their investment. For more information about these strategies and their risks please consult your financial advisor.
This material is not intended to be a comprehensive overview of the subject matters discussed. It is intended to be general in nature and should not be construed as investment advice or a recommendation of any specific security or strategy. Before investing in any of the investment products or strategies discussed, consult with your financial advisor to determine if they are appropriate for your objectives, risk tolerance, income level and investing time horizon.
Rydex SGI offers funds with investment strategies similar to those referenced on getalts.com.
Read the fund’s prospectus carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information. Download a prospectus or call 800.258.4332 for complete information.
The funds are distributed by Rydex Distributors, Inc. (RDI). Security Global InvestorsSM is the investment advisory arm of Security Benefit Corporation (Security Benefit). Security Global Investors consists of Security Global Investors, LLC, Security Investors, LLC and Rydex Investments. Rydex Investments is the primary business name for PADCO Advisors, Inc. and PADCO Advisors II, Inc. SGI and RDI are affiliates and are subsidiaries of Security Benefit.
©2010 Rydex SGI. All rights reserved.
