To strive to improve the risk-return characteristics of your investment portfolio.
Alternative investments is as investment in any asset class other than the traditional stocks, bonds, or cash. Alternative investments is an all-inclusive term that captures financial assets like real estate, private equity, life settlements, hedge funds, venture capital, and more. Despite the unique risks and considerations that come with these investments, such as the fact that they are very speculative investments that often carry high expenses and are typically illiquid, alternative investments can be an extremely useful tool to alter your portfolio’s risk-return characteristics. Such investments can increase diversification and reduce volatility. Also, considering the historically low correlations to more traditional investments; they can offer the potential for enhanced returns due to the wider investment opportunity set; and they can hedge certain portfolio exposures, thereby reducing concentration risk.
Alternative Asset Classes
• Real Estate
• Private Equity
• Private Debt
• Market Neutral
• Managed Futures
• Global Macro
• Event-driven Arbitrage
Potential Benefits to Investors’ Portfolios
Our Alternative Investments include
Tax Opportunity Zone Investing
Tax advantaged investing resonates with each and every client. A unique choice in the alternative investment space is Opportunity Zone Investing.
This program provides a federal tax incentive for taxpayers who reinvest capital gains into “Opportunity Funds” which are specialized vehicles dedicated to investing in low-income areas called “Opportunity Zones”.
Specifically designed to promote long term investments in designated neighborhoods across the country, opportunity zones offer distinct federal tax considerations. It supports a new direction to connect separate, individual assets into untapped identities across the country, in a way that seeks to benefit both participants. This opportunity presents to eliminate taxes on the profits from your funds. It enables keeping the gains solely with you if you’re in the zone, yet after ten years by preventing the government body to claim benefits on your capital earnings.
Opportunity Funds are a new class of investment vehicle that aim to responsibly drive much-needed capital into rural and low-income urban communities. Opportunity Funds seek to activate passive holdings by connecting investors to investment opportunities located in newly designated Opportunity Zones.
This concept – originally introduced in the Investing in Opportunity Act (IIOA) – is the first new community development tax incentive program introduced since the Clinton Administration. The program will allow U.S. investors to receive a temporary tax deferral and other tax benefits when they reinvest capital gains into Opportunity Funds for a minimum of five years. Today, trillions of dollars in capital gains are held in stocks and mutual funds alone. This capital could soon be invested in Opportunity Fund to work to uplift local economies throughout the nation.
An “opportunity fund” is any investment vehicle organized as a corporation or a partnership to invest in opportunity zones that holds at least 90% of its assets in opportunity zone assets.
Taxpayers may temporarily defer the recognition of capital gains that are invested in opportunity zones. Investments in opportunity zones or opportunity funds that are held for at least five years are eligible for capital gains tax reductions or exemptions, depending on how long the investment is held. Designed to encourage long-term private investments in low-income communities, Opportunity Zones were established by Congress as a part of the Tax Cuts and Jobs Act of 2017.
H.R. 1 (the Tax Cuts and Jobs Act) was signed into law on December 22, 2017.
The Opportunity Zones Program (Sec. 13823) provides tax incentives for qualified investors to reinvest capital gains into low-income communities throughout the state, and across the country. Low-income census tracks are areas where the poverty rate is 20 percent or greater and/or family income is less than 80% of the area’s median income.
Designed to encourage long-term private investments in low-income communities, Opportunity Zones were established by Congress as a part of the Tax Cuts and Jobs Act of 2017.
Capital gains tax form a portion of the sales of your long-term assets, be it real estate or stocks. These taxes are heavily-priced demands. If you intend to sell a piece of land that you own, the charges that will be levied on that land will be based on its current value. 1031 tax-deferred exchange is an advantage that will allow you to shelve the capital gains tax. There are specific points to consider in planning to invest in the 1031 exchange program. By obeying stipulated time conditions and particular rules, the tax-deferred investment strategy will enable you to trade your property-on-sale and buy another likewise property in return.
There is an obligatory requirement of a competent, reputable, and valued person- the Qualified Intermediary, who, in the process, will act as a mediator during the whole 1031 exchange process. From the most prevalent ownership structures for investors to access properties and options in 1031 exchange programs, together with accredited bodies, are The Delaware Statutory Trust (DST) and Tenancy in Common (TIC).
Certain other alternative investments include the real estates, oil and gas, private equities, life settlements, conservation development, etc.
A Delaware Statutory Trust or a DST is given mainly as real estate securities. It is extremely popular with 1031 Exchange investors. DST investments are passive real estate investments. They allow investors to get fractional indirect ownership in real estate properties. Investors do not need to bear the burden of property management. The structure for a DST investment was first created in Delaware in 1947. However, a DST doesn’t need to be located within the State of Delaware. DSTs are generally responsible for purchasing, managing, administering, and selling real estate properties. Investors within a DST enjoy their pro-rata share of any income, appreciation, and tax benefits. 1031 DST Property offers similar potential benefits and risks as any other real estate investment.
Positives in a DST investment
- Low investment – A DST investment may start from as low as $100K.
- Large structure – There is no limitation on the number of investors a DST can possess. This opens the DST option for small investors also. Investors with low capital also prefer it. DST allows investors to acquire ownership in institutional-grade properties by making the least investment.
- Relief from property management- 1031 DST property is handled by property managers. Therefore, investors do not have to bear the burden of property management.
The downside of a DST investment
- No title to a property – Investors within a DST don’t receive property title.
- Can’t form single-member LLCs – DST investors aren’t allowed to form single-member LLCs.
- No voting rights- DST investors don’t have voting rights over the operation of properties held by the DST.
The 1031 Exchange name comes from Internal Revenue Code Section 1031. It enables you to defer capital gains tax and depreciation recapture by reinvesting the proceeds from the sale of investment property into replacement property, thus seeking to preserve wealth in your estate. Your 1031 exchange deferrals can be continued through as many exchanges as you wish. However, when you sell the property without reinvesting in a new property, there will be capital gains and depreciation recapture tax liability.
A tax-deferred 1031 exchange can be a powerful tool in striving to build wealth. However, we highly recommend you consult a professional tax advisor to ensure that you meet every requirement of Internal Revenue Code Section 1031. Failure to meet requirements can result in immediate tax liabilities and associated penalties. In addition, you must follow—to the letter—the strict timeline and procedural requirements for a proper 1031 exchanges.