Author Topic: Non-stock investments  (Read 12292 times)

gg

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Non-stock investments
« on: October 15, 2013, 02:44:22 PM »
I had an interesting discussion with a friend today and want to see if any of the creative investors on this Board have thought about this or have any unique insights/ideas.

My friend works at a large family office that is pretty forward thinking, and with the equity and bond markets both priced quite richly, they have had a few discussions about what types of non-stock/bond market investments they could be making that would offer strong risk-adjusted returns. They have done this successfully in the past, and are eager to find new opportunities where they can put capital to work. Importantly, their capital is long term, and they are not held back by fear of a bad reputation or making career-limiting moves--in fact they eagerly pursue ideas precisely because they might be considered less institutional.

As an example, they were large scale investors in foreclosed homes very soon after local banks began to have a significant amount of their capital tied in owned real estate. Soon after that, though, they realized the real liquidity vacuum was in lending to real estate investors, and between 2009-2012 they had been able to source very well-collateralized loans to all sorts of real estate investors and developers at double digit interest rates. While the absolute return of mid-teens are not astounding to many investors on this board, in the context of their portfolio, it was a great source of return considering the extremely low risk--I think they never lent out money beyond 50-60% a loan-to-value. Further, they were able to put lots of capital to work in this theme.

Anyways, as the returns in that area have now become significantly less attractive, they are looking for new areas of opportunity where they can again either fill a liquidity void or be an early institutional investor in industries or asset classes that are not yet institutionalized, or where temporary dislocation or structural issues have caused institutional capital to be scarce. Basically, if its obvious or clean enough for a typical institutional investment firm to be involved, they are not really interested....Anyone have any creative ideas?


Hielko

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Re: Non-stock investments
« Reply #1 on: October 15, 2013, 03:35:45 PM »
traded life interests?

Kraven

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Re: Non-stock investments
« Reply #2 on: October 15, 2013, 04:56:46 PM »
traded life interests?

Ugh, such a scummy business.
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bookie71

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Re: Non-stock investments
« Reply #3 on: October 15, 2013, 07:54:04 PM »
discounted deeds of trust?
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oddballstocks

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Re: Non-stock investments
« Reply #4 on: October 15, 2013, 08:40:35 PM »
traded life interests?

Ugh, such a scummy business.

Yes, not sure of the reputation for this in Holland, but in the US it's a gutter business.  Someone who runs a local strip club is going to garner more respect than someone doing traded life interests.

There's also some question as to the legality of this in the US.
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Phaceliacapital

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Re: Non-stock investments
« Reply #5 on: October 16, 2013, 12:13:27 AM »
Investing in LEGOs? I don't know if anyone has any experience in that field, but it can turn out well if you know what you are doing. Since the market for those doesn't really operate on a fully rational basis, there might be some ways to make money here.

Funny you mentioned this, I think selective investing in the Series 10 Collector series does offer quite compelling returns. Especially the early Star Wars sets such as the Star Destroyer and Millenium Falcon were worth your while back in the days. Nowadays I focus on series that are known to have a very limited production line or that have an exclusive history (like for instance the co-operation with Maersk, which together with Lego are the two richest families in Denmark). I think around 2.5% of my portfolio is invested in Lego boxes.

Of course my personal downside is limited as I do not mind building the sets instead of selling them :D
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T-bone1

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Re: Non-stock investments
« Reply #6 on: October 16, 2013, 01:09:26 AM »
Helium

ASTA

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Re: Non-stock investments
« Reply #7 on: October 16, 2013, 04:19:31 AM »
Why not hire some small hedge fund to run some money. For example Corner Market Capital Corporation.
You only pay them if they preform and no pesky labor laws and stuff for staff managing family money.
And the upside is that if they loose big they are whipped out as well.
Not being mean here just saying like Munger says 95% of the population don't understand incentives enough. 
Off course family adviser might not like that idea :D 

Kraven

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Re: Non-stock investments
« Reply #8 on: October 16, 2013, 07:45:14 AM »
traded life interests?

Ugh, such a scummy business.

Yes, not sure of the reputation for this in Holland, but in the US it's a gutter business.  Someone who runs a local strip club is going to garner more respect than someone doing traded life interests.

There's also some question as to the legality of this in the US.

The person running the local strip club is like a pillar of the community compared to someone in the life settlements business.  If I had to choose who would watch my kids (assuming a gun was put to my head and I had to choose) between the 2, I'd take the strip club guy over the life settlements guy.
Buy cheap and something good might happen.

gg

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Re: Non-stock investments
« Reply #9 on: October 16, 2013, 08:27:17 AM »
Thanks for the postings so far. Looks like the main ideas so far have been:

Traded Life Interests: I don't know too much about this area, but my understanding is that it actually is quite an institutionalized market, with several publicly-traded firms that participate. I've always thought about traded life interests as similar to reverse mortgages, as offered in so many daytime TV commercials--essentially the reverse mortgage provider gets the house's equity upon death of the senior citizens who reside there. No doubt that both businesses employ some shady characters, and there's probably some historical alpha associated with the non-desirability of owning (or being associated with) them such as with "sin" stocks but without knowing too much about it, I think the main concern is that its already simple for institutions to access the market.

Helium: T-bone1, any specific reasons why helium might fit the profile they are looking for?

Legos: To my knowledge, this would definitely put them on the frontier of a new asset class. But, unfortunately, assuming they were willing to become (or hire) experts in the Lego field, I imagine it is nearly impossible to put tens of millions to work in Lego boxes and not completely move the market.

Any other interesting ideas? I know at one point they considered buying royalty streams from the estates of dead artists. Another interesting area my friend mentioned was that they looked into financing recovery expeditions of old ships that were believed to have sunk with significant valuables.