Grow Your Wealth Faster with Alternative Assets: A Complete Guide to the New Universe of Investment Opportunities by Travis Miller

Part I
The what, why and how of
alternative assets

Chapter 1
Where it all started
Let's start out by taking a look at the recent history of alternative assets and
how I got into them.
I can't talk about the history of alternative assets without framing it around
the GFC (global financial crisis), which was an investment game changer.
So here's a quick refresher before we get into it. As you may well know, the
GFC was a severe worldwide economic crisis that occurred from mid 2007
to early 2009. It was the most serious financial crisis since the Great
Depression of the 1930s. It was caused by house prices in the United States
falling and a rising number of US borrowers being unable to repay their
mortgages. As a result, various US banks held trillions of dollars of
worthless loans. Because of the linkages in the global financial system, this
downturn in the United States spread to the rest of the world, resulting in a
deep global recession. Millions of people lost their jobs, and banks incurred
large losses and ended up having to rely on government money to avoid
bankruptcy.
Before the GFC, alternative asset opportunities for everyday investors in
Australia mainly came out of banks as what's known in the business as
‘structured products’. The underlying assets tended to be hedge funds,
alternative funds or products combining a deposit with embedded
derivatives (a derivative is a contract between at least two parties that
derives its value from something else, such as an underlying asset or event
outcome). These products were called ‘structured’ because they tended to
have a loan embedded in them, or some other complexity. (We'll dive into
structured products in part 2). The aim of the banks in making these
products available was to effectively build their loan books by lending
money to retail and wholesale investors so they could gain access to these
assets. The banks, in turn, collected both interest on the loan and product
fees.
Post GFC, a large proportion of these assets underperformed, and it wasn't a
great experience for investors because of the loan element. When the

Grow Your Wealth Faster with Alternative Assets: A Complete Guide to the New Universe of Investment Opportunities by Travis Miller