Alternative Investments: Five Key Themes | Ezine Daddy

risk considerations

alternative investments can be either traditional alternative investment vehicles such as hedge funds, hedge funds of funds, private equity, private real estate and managed futures, or non-traditional products such as mutual funds and exchange traded funds, which also seek alternative exposure but have distinct differences from traditional alternative investments. Alternative investments are often speculative and involve a high degree of risk. Investors could lose all or a substantial portion of their investment. Alternative investments are only suitable for qualified, long-term oriented investors who are willing to forego liquidity and risk capital indefinitely. They can be highly illiquid and engage in leverage and other speculative practices that can increase volatility and the risk of loss. Alternative investments usually have higher fees than traditional investments. Investors should carefully consider and consider potential risks before investing. Certain of these risks may include, but are not limited to: loss of all or a substantial portion of the investment due to leverage, short selling or other speculative practices; lack of liquidity as there may not be a secondary market for a Fund; volatility of returns; restrictions on the transfer of Shares in a Fund; Potential lack of diversification and consequent increased risk due to concentration of trading authority when using a single adviser; lack of information on reviews and prices; Complex tax structures and tax reporting delays; Less regulation and higher fees than mutual funds; and risks associated with the Manager’s operations, personnel and processes. In addition, opinions expressed herein regarding alternative investments may differ from the opinions expressed by Morgan Stanley Wealth Management and/or other Morgan Stanley Wealth Management companies/affiliates.

Certain information contained herein may constitute forward-looking statements. Actual events, results or the performance of a Fund could differ materially from those reflected in or contemplated in such forward-looking statements due to various risks and uncertainties. Clients should carefully consider a Fund’s investment objective, risks, charges and expenses before investing.

Alternative investments involve complex tax structures, tax inefficient investments, and delays in disseminating important tax information. Individual funds have specific risks associated with their investment programs, which may differ from fund to fund. Clients should consult their own tax and legal advisers as Morgan Stanley Wealth Management does not provide tax or legal advice.

Interests in alternative investment products are offered subject to the terms of the applicable prospectus, distributed by Morgan Stanley Smith Barney LLC and certain of its affiliates, and (1) are not FDIC insured, (2) are not a deposit or other obligation of Morgan Stanley or any of its affiliates affiliates, (3) are not guaranteed by Morgan Stanley and its affiliates, and (4) involve investment risks, including the potential for loss of capital. Morgan Stanley Smith Barney LLC is a registered broker dealer, not a bank.

hedge funds may involve a high level of risk, frequently engage in leverage and other speculative investment practices which may increase the risk of investment loss, may be highly illiquid, are not required to provide investors with pricing or valuation information on a regular basis, involve complex tax structures and delays in the dissemination of important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees that can offset any trading profits, and in many cases the underlying investments are not transparent and known only to the investment manager.

REITs invest The risks are similar to those of investing directly in real estate: fluctuations in property values, lack of liquidity, limited diversification and vulnerability to economic factors such as interest rate changes and market recessions.

Options are not suitable for every investor. Such sales material must be accompanied or preceded by a copy of the Characteristics and Risks of Standardized Options (ODD) brochure. Investors should not trade options until they have read and understood the ODD. Before buying or selling options, investors should understand the nature and extent of their rights and obligations and the risks involved, including but not limited to risks relating to the business and financial condition of the issuer of the underlying security or instrument. Option investing, like other forms of investment, involves tax considerations, transaction costs, and margin requirements that can significantly affect the profit and loss of buying and selling options. The transaction costs of option investing consist primarily of commissions (charged on opening, closing, exercise and assignment transactions), but may also include margin and interest costs on certain transactions. Transaction costs are particularly important in options strategies that involve multiple purchases and sales of options, such as B. Multi-leg strategies including spreads, straddles and collars. A link to the ODD is provided below:

equity securities may fluctuate in response to news about companies, industries, market conditions and the general economic environment.

Bind subject to interest rate risk. When interest rates rise, bond prices fall; The longer the maturity of a bond, the more vulnerable it is to this risk. Bonds may also be subject to call risk, which is the risk that the issuer may, at its discretion, redeem all or part of the debt before its scheduled maturity date. The market value of debt instruments may fluctuate and proceeds from sales before maturity may be higher or lower than the amount originally invested or the maturity value due to changes in market conditions or changes in the issuer’s credit quality. Bonds are subject to the credit risk of the issuer. This is the risk that the issuer may not be able to make timely payments of interest and/or principal. Bonds are also subject to reinvestment risk, which is the risk that principal and/or interest payments from a particular investment will be reinvested at a lower interest rate.

Bonds rated below investment grade may have speculative characteristics and involve significant risks in excess of those of other securities, including greater credit risk and secondary market price volatility. Investors should carefully consider these risks, along with their individual circumstances, goals and risk appetite before investing in high yield bonds. High yield bonds should make up only a limited part of a balanced portfolio.

The initial interest rate on a variable rate security may be lower than that of a fixed income security of the same maturity as investors anticipate additional returns due to future increases in the variable security’s underlying reference interest rate. The reference interest rate can be an index or an interest rate. However, there is no guarantee that the Reference Interest Rate will increase. Some floating rate securities may be subject to call risk. Many floating rate securities have minimum (floor) and maximum (cap) interest rates. Floaters are not protected against interest rate risk. In an environment of falling interest rates, floaters will not appreciate as much as fixed-rate bonds. A decrease in the applicable reference interest rate will result in a lower interest payment, which will negatively affect the regular income from the floater.

income are subject to economic changes. Yield is just one factor that should be considered when making an investment decision.

duration, the most commonly used measure of bond risk, quantifies the impact of interest rate changes on the price of a bond or bond portfolio. The longer the duration, the more sensitive the bond or portfolio is to changes in interest rates. In general, when interest rates rise, bond prices fall and vice versa. Longer-dated bonds have a longer or greater duration than shorter-dated bonds; as such, they would be affected by interest rate changes over an extended period of time as interest rates rise. As a result, the price of a long-term bond would fall significantly compared to the price of a short-term bond.

Because of their narrow focus, industry investments tend to be more volatile than investments diversified across many sectors and companies. Risks for companies in the energy and natural resources Sectors include Commodity Price Risk, Supply and Demand Risk, Depletion Risk and Exploration Risk. Healthcare stocks are subject to government regulation and government approval of products and services, which can significantly affect price and availability, and which can also be significantly impacted by rapid obsolescence and patent expirations.

Asset Allocation and Diversification do not guarantee a profit or protect against losses in falling financial markets.

rebalancing does not protect against a loss in falling financial markets. A rebalancing strategy may have potential tax implications. Investors should consult their tax advisor before implementing any such strategy.

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