Residential property prices have crashed. The stock market smashed last year, and despite a bull run this summer, is still 25% below its all time high. With the base rate at 0.5%, the best bank accounts aren't yielding much more than 3%. No wonder investors are looking for alternatives.
Even if they only offered similar returns to cash and equity investment, alternative investments would still provide portfolio diversification. That might not have worked over the past two years in all areas – though investors in wine would have outperformed the stock market very significantly – but over time, it should provide added robustness to a portfolio.
So what are the some of the options available to investors?
Agricultural investment
One interesting alternative is agricultural investment. Buying an arable farm might not be realistic for most investors, but pooled investment funds now allow investors to put as little as £1,000 a time into jatropha plantations (a form of biofuel) via Green Oil Investments [1] , wheat in Western Australia via Hurlingham Capital [2] , and teak plantations in Costa Rica via Costa Rica Invest [3] .
While investors could equally – and more easily – purchase a commodities ETF, these investments give an exposure to land values as well as commodity prices and income. Hurlingham's wheat based investments offer low risk (the capital value is partly protected) together with yields around 8% a year, and terms from 5 to 7 years. These look highly attractive for the income investor. Other prospects, such as some of the biofuels investments on the market, offer much higher returns, but have potentially higher risks, being based in countries where political risk is high. Not all such schemes offer annual returns; some require a 5-15 year investment period (for instance, in teak, even if bought as an existing plantation).
This is still a fairly new area of investment, and investors should do due diligence on the legal small print of the scheme as well as the underlying investment story.
Forestry
Forestry, on the other hand, has a long history as an investment for high net worth individuals in the UK. There are substantial tax breaks for forestry – no income tax or CGT is payable, and forestry investments are free of inheritance tax liability once they have been owned for two years.
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