1. The economy before and after the 2008 crisis
With the downturn in the world economy since 2008 as a result of the banking crisis, the phenomenon 'bank', and especially 'savings bank', has lost its charme and popularity as an investment institution. Savings interest rates combined with current inflation provides no or negative results. Even worse: Banks are already starting to charge a fee for managing your savings accounts. Investors are therefore looking for other forms of investment for a decent return on their capital. Security and predictability are very important. A low risk profile but still with high returns.
The stock markets trade billions in stocks and related products. And allthough the S&P500 has risen with an average of 10% per year, investing in the stock market is a strategy that doesn't fit each and every investor because there are uncertainties and every now and then a steep decline. Everyone knows how the stock market collapsed in 2008 as a result of the American debt crisis. Even stocks guru Warren Buffet has lost millions. And at the beginning of 2016, when the stock market was more or less back at the levels of 2008, there was another sharp decline, pushing the AEX below 400 points. At the start of 2018 the exchanges indeces are soring again. Question is how long this will last and the next crisis will hit.
How do succesful investors deal with this?
The key to successful investing is risk management and diversification. By diversifying the investment portfolio the effects on the entire investment as a result of a downturn in one specific sector is limited. The essence is to spread out the investments over different non-correlated sectors, each with a different risk / reward ration. An investment portfolio may for instance be comprised of a percentage stock related products that is in itself further diversified over different products (like stocks, bonds, options, foreign currencies) and a percentage alternative investments, such as real estate, precious metals, commodities etc. A sudden drop of the oil price as a result of a geo policital event usually has little effect on the real estate market and may even lead to a steep increase of the price of gold. The overall effect, however, on the results of this diversified investment portfolio is rather limited. The next picture cleary shows this effect:
Is this suitable for every investor?
Every investor has the choice between 'do it yourself' or 'leave it to the pros', because each investment product or strategy requires knowledge and education and not everyone has the time and energy to acquire that knowledge. As an alternative it may be an option to ride with the experts, profit from their results and achieve capital growth without a lot of effort. It safes time and stress and creates the space to do other things.
In this world of investments there is always a level of uncertainty and difficult choices to be made. But why is it that some people are still making money hand over fist despite all that economic insecurity. Is there something they know that you don't know. The answer is 'YES', there are certain types of investments out there that take place in relatively unknow niche markets.
2. Alternative investment possibilties
Results of alternative investment products are not one-on-one related to the price development of traditional investments in the stock markets. Alternative investments can be, for example, the more commonly know investments in commodities, real estate, Het kan daarbij bijvoorbeeld gaan om de wat bekendere beleggingen in grondstoffen, onroerend goed, farmland, private equity-funds, hedge-funds, infrastructure funds or derivatives. But there are also less known possibilties that can be found in usually closed niches that are only accessible the insiders.
With her American business partner MM Global Movies has developed such an alternative investment product that is almost fully independant of the global economy. It is called ‘Asset Backed Entertainment Financing’ and provides temporary (so called bridge) financing to American and British film productions.
This is an unknown niche market with very limited accessibility that has proven itself over the past years. Interesting detail is the fact that the movie industry is a fast growing market that proves to be insensitive to economic developments. Stronger still: when the economy show a downward trend, more people go to the cinema.
Over het algemeen wordt beleggen in films gezien als riskant, hetgeen correct is indien de opbrengsten afhankelijk zijn van het eindresultaat, ofwel hoe goed een film het doet in de bioscopen:
In general investing in movies is regarded has a high risk, which is true when the profits are solely depending on the end result:
In particular in smaller market, such as for instance the Dutch market, ther are few production that are truly succesful and investing in them is indeed high risk. A commonly know structure called 'Film CV' which is still offered occasionally is strongly discouraged by the authorities. Profits always depend on the succes of the movie and are partly depending on the fiscal position of the investor, involving a one time fiscal advantage.
The investment product ‘Asset Backed Entertainment Financing’ focusses solely on the inital stage of the movie development and is detached from the end result. Remaining risks are identified and are reduced by a system of conditions precedent and gurantees for each projects that are set up by specialists. The track record show that high return are common and in fact the rule, rather then the exception:
Asset Backed Entertainment Financing offers another significant and unique advantage: because the duration of projects is relatively short, some 2 weeks to a couple of months, this methode of investing can be used as a short term investment or cash management strategy. Returns are similar to investing in real estate, however, without all the extra work and without an inevitable long term lock down of capital.