Triggered by a stalling economy and cooling off of traditional markets, interest in alternative investments is growing. With interest rates rising and the risk of corporate insolvency, savvy investors are looking for alternative investments to fuel lucrative returns on their portfolio.

Bond yields are also skyrocketing, meaning that fixed-income safe havens are less attractive, especially as debt becomes too expensive to carry. The once-lucrative bond market is collapsing under the weight of risky leverage and potential corporate insolvency. 

Even investors’ once-reliable cash positions are rapidly losing value as inflation is hitting the dollar and other global currencies. In short, the holy trinity of traditional investing – stocks, bonds, and cash – have lost 20% of their collective value since the start of the year. Even worse, there promises to be more pain ahead. How, then, will you invest your hard-earned money to preserve your way of life and ensure your financial legacy? Alternative investments might be the route to go.

What Are Examples of Alternative Investments?

While some forms of  “alternative investments” ignite a healthy degree of skepticism, including crypto scams, hedge fund misbehavior, and venture capital-funded collapses, there is a whole lucrative class of alternative investments available only to higher net worth, accredited investors. These have proven to reliably outperform the market. If you are willing to do some due diligence, learn the story and people behind the investment, and take a moderate risk there is potential for massive reward.

The alternative investment industry will hit more than $23 trillion in 2026, according to one study. That would mean a doubling of itself in just a few short years – huge returns in any environment, but especially insane when compared to portfolios loaded with traditional investments, which are projected to fall off a cliff. Let’s look at a few common types of alternative investments to better understand the seemingly endless possibilities:

Private Equity and Venture Capital:

Private equity (PE), and venture capital (VC), both involve pooling your money with other investors to fund private businesses or start-up companies. After giving these companies money, many PE and VC firms take an active role in shaping or helping the progress of the company to maximize their return. PE and VC investments typically have a long-term time horizon and involve taking on debt to fund the investment.

PE and VC both run the risk of company failure, or leverage getting too expensive to maintain – both of which are a reality now as federal interest rates hammer the margins on already-tight growth and technology company profits funded by PE and VC.

Real Estate

Real estate is what most think of when they hear “alternative investing.” Investment in real estate is guaranteed to provide returns over a long enough time horizon and can generate perpetual cash flows if the properties are leased or rented. The main difficulty in active real estate investing is gaining access to enough capital to purchase or build and subsequently maintain properties. 

Real Estate Investment Funds

These funds offer the benefits of both private equity and real estate while reducing risk. A real estate fund pools investors’ money to purchase land, property, and facilities but mitigates the risk of total collapse (real estate retains value and appreciation) and assumes the burden of management This leaves investors, also called limited partners, free to enjoy the fruits of their investments.

Hedge Funds

Originally created to hedge against overall market risk through financial engineering and unique strategies like short sales, currency trading, and complex derivatives, hedge funds now refer to a broad class of privately managed wealth management houses. Hedge funds invest in the strategies above, but also traditional asset classes like stocks and bonds, and alternative investments like some of the ones in this article.

The risk of hedge fund investment, in addition to overall market risk, is that you have limited visibility of what strategy the fund is using. You might remember that Bernie Madoff ran his Ponzi scheme and defrauded investors through his hedge fund. There was no investor oversight mechanism to ensure Madoff was investing his principals’ money according to his charter. By the time investors realized what the hedge fund was doing, it was too late.

Collectibles

Collectibles include tangible goods that have, or are expected, to increase in value – art, baseball cards, wine, etc. Collectibles can be a great alternative investment for someone who is already passionate about the assets they’re collecting. But there are a few unique risks including 1) requirement for storage space and proper storage conditions 2) risk of fraud or counterfeiting and 3) risk of damage or destruction. Any one of these risks can reduce margins or even render your investment worthless. It’s a better idea to collect high-value items for cosmetic or sentimental appreciation of the collectibles themselves, while object appreciation remains a secondary benefit (just ask everyone with a basement full of Beanie Babies).

Private Debt

There are many ways to invest in private debt, including direct lending, buying up distressed debt from falling companies, and mezzanine financing that involves complicated debt to equity conversions. At its most basic, all involve an investor or group of investors lending money to companies (many times in financial straits) with an expectation of standard principal repayment and periodic interest payments.  As with Private Equity and Venture Capital, the risk is obvious but exaggerated – the underlying company may go bankrupt or insolvent, and a fire sale on its assets may not be enough to return the principal to the investors, let alone appreciable returns.

Regulation of Alternative Investments

Minimal Regulation

A fundamental benefit and added risk of alternative investments is the minimal regulation compared to traditional investing vehicles. The most basic difference is that traditional asset classes must be registered with the Securities and Exchange Commission (SEC), whereas most alternative investments do not – although oversight rules do apply. The primary regulation that does surround alternative investments is investor status.

Investor Status

Some private funds are only available to what’s known as accredited investors or qualified purchasers. Accredited investor status is determined by income, net worth, or holding some specific credentials, while qualified purchasers are defined by the total investment value – different SEC-defined alternative investments require different statuses, but the bottom line is that most alternative investments are much more exclusive and less available to retail investors compared to traditional ETFs, mutual funds etc.

 

Accredited Investor Status: The Door to Lucrative Alternative Investments

 

Less Red Tape 

In the case of private funds, limited and general partners agree to terms before investment in a collaborative way that can preclude a lot of the standard SEC-filings required of traditional classes. As a result, the firm can ultimately focus on what matters – managing your assets and making you money – not remaining in compliance with SEC requirements and filings.

Expense Structure

Expenses and fees range widely between investments and firms, but they are a result of collaboration between limited and general partners and, more importantly, are largely contingent upon the firm making money on behalf of its client base. While an ETF, for example, deducts a management fee from capital gains regardless of performance, a private equity firm gets the bulk of their non-administrative expenses after returning the principal to limited partners and bases fees on a percentage of total profit. This incentivizes the firm to maximize profits for the client to maximize profit for themselves – something you don’t see with mutual funds or ETFs.

Relationships

Since these investments are so exclusive, you get the benefit of a personal, one-on-one relationship with your investment management team. Their primary goal, aside from making you money, is ensuring that you’re comfortable.

At Kona Development Partners, this is the cornerstone of our mission. You’ll get assigned a personal sponsor available for any questions you might have. You’ll also be part of a robust onboarding process prior to investment to ensure you understand the wide range of possibilities available to you as part of the Kona Development team. We set ourselves apart in many ways, not the least of which is that you’ll get our private cell phone number – this level of access between client and investment firm is unheard of in traditional investments, and even rarer for most alternative investments. We pride ourselves on always being available to you – no matter the need.

 

Risks and Benefits of Alternative Investments

 

As with any investment strategy, alternative investments have their own set of risks and rewards. While the risks are generally balanced by the potential for greater reward, at Kona Development Partners we’re proud to mitigate and eliminate many of the risks that plague other alternative investment groups. 

Common Risks of Alternative Investments 

Less Regulation:

Much of the systemic risk centers around the fundamental lack of regulation. Since there are no direct or indirect reporting or oversight mechanisms, some sectors of alternative investing are fraught with grift and fraud. We offset that concern by building a relationship with you prior to investment. With our track record that accounts for nearly $1B in estate sales and a track record of successful projects in the region, you can rest assured that your investment is safe with us.

Leverage:

The second primary risk that befalls private or alternative investments is overuse of leverage, or debt. Assuming too much debt in uncertain economic conditions is a recipe for disaster. At Kona Development, we don’t use debt or leverage ourselves. Nearly all private market and real estate firms are heavily leveraged, especially early in their lifecycle, which massively increases total-project and total-investment risk if there is any change to timeline or an unexpected project or economic occurrence. Kona Development’s zero-debt structure gives you flexibility as conditions change and ensures the ongoing viability of your investment. This means peace of mind for you and your family as the capital is backed by real estate and real property with no debt involved.

Illiquidity:

The final primary risk of alternative investments is illiquidity. Since there isn’t a market full of buyers and sellers setting pricing for these alternative investments, they can be difficult to value or offload. Kona Development manages valuation with constant, direct communication between us and our clients during each phase of the investment cycle. You will also have access to your private Investor Portal to get project updates, monitor investment performance, and receive quarterly/annual statements.

Benefits of Alternative Investments 

There are a myriad of benefits to alternative investing. Let’s cover a handful of the most important pluses of the alternative investment market: 

Diversification

Most importantly right now, a primary benefit is the opportunity for diversification. It’s a scary and uncertain time in equities, bonds, and cash as the Federal Reserve plays fast and loose with the economy, ultimately affecting your bottom line. Most alternative investments, including Kona Development’s, are non-correlated with the market. This means that the market tanking has no effect on your investment with us – we aren’t tied to the daily volatility of the S&P 500, for example. So, alternative investments give you an option to offset losses in traditional assets while enjoying a significant upside.  Another benefit, tied to the intimate relationship between investor and firm, is that risk management teams tend to be top notch due to the increased compensation driven by increased total return.

Higher Reward to Risk

The number one benefit to alternative investing is the massive reward to risk ratio. Gains can be hugely outsized, untethered from traditional market cycles. Kona Development is no exception. We anticipate a 2x target equity multiple and a 22% IRR – significant at any time, but especially now as traditional investments provide negative returns, and your cash loses value daily as a result of inflation.

Is Investing With Kona Development Partners, LLC the Right Alternative Investment For You?

If you’re nervous about parking your cash in stocks, bonds, or (even worse) cash positions right now, you aren’t alone. Millions of Americans are fearful of what will happen next, but they don’t have access to the opportunity that you do. As an accredited investor with us, you gain access to a unique, bespoke, and personal experience to generate capital gains and protect your financial legacy. Kona Development is not a project in the R&D phase. Rather, we represent years of money and time invested to bring you the greatest opportunity we can through due diligence and intelligent project management.

 Our debt-free structure means the land is already paid for with site work beginning and heavy equipment arriving at our job site daily. We’ve broken ground on site improvement, and the predevelopment funding phase (already complete) means that we’re cash-positive and postured to continue. As we enter our Class B series offering, the primary development round, you get the chance to participate in continued massive upside potential. The train just left the station, so to speak, and there’s still time to jump on. 

As an equity partner, you become a pro rata owner of a share of 324 sprawling acres on the gorgeous, exotic Kona cost. Your dollars are secured and backed by miles of luxury, beachfront real estate – something you don’t get when you choose other alternative investments. 

At its core, investment in Kona Development means investing in a new family – we’re here for you, day and night, and will succeed alongside you, not despite you. Is an investment with Kona Development Partners, LLC right for you? Request the investment details or set up a call and find out. We’re ready for you.