How alternative investments can allow experienced investors to get involved in passion investing

By Jo Bentham3rd September 2021

It’s commonplace to find experienced investors holding a number of investments in their portfolio because the asset or deliverables of the asset interest them. Whether that’s because it’s related to their profession, is an extension of a hobby or is something they simply wish to support.

Article main image

This is commonly called passion investing, and the concept is a simple one: invest into opportunities you’re passionate about. Investing into your passions is not a new phenomenon – art, for example, has been purchased and traded for centuries – but the opportunities have widened and become increasingly more accessible in recent times.

The rise of alternative investments has had a role to play in this. With a wealth of alternative assets available – from venture capital and property bonds, to cryptocurrencies and collectables – it’s probable even niche-focused experienced investors could find a passion investment to add to their portfolio.  

And in research from NextGen Cloud, 30% of investors surveyed claim to be attracted to the potential alternative investments allow to invest into assets they’re passionate or have in-depth knowledge about.

As an example, investors with an interest in supporting startups could consider venture capital, whereby capital is invested in exchange for equity in an early-stage company that looks poised for considerable growth. 

With this comes opportunities to invest into startups within a particular sector of interest – such as fintech or pharmaceuticals – or that are based in a specific geographic area. 

When selecting a VC investment based on location, investors passionate about inward investment into their local area are able to help scale businesses and create a localised multiplier effect to the economy, in turn aiding in the creation of jobs and advancing the area more generally. 

In addition, startups and scaleups in the UK had a record-breaking Q1 of 2021, with investment totalling circa £5.1 billion – a sign the draw of backing UK-based businesses at a time when it’s needed most has further boosted the already popular asset. 

Another example of a popular asset that has the potential to be both a passion and impact investment for investors is property. 

 

Passion investing with property bonds

With consistent demand, a history of strong capital growth and the potential to generate a regular income, it’s unsurprising that the residential property market is one of UK investor’s most favoured assets. Yet it’s often far more than exposure to the property sector that attracts said investors. 

It’s clear why an asset with traditionally strong and somewhat predictable gains is appealing to investors, but it’s property’s ability to allow you to support your passion – be that purchasing a new home for your children, or supporting the development of affordable new-build homes that enable others to get onto the housing ladder – that is a driving factor for many. 

Whilst some investors could find purchasing properties outright for the purpose of renovation and resale most appealing – particularly those who are lured by stories of relatively quick capital growth because of “flipping” – others will find this method of property investment too labour-intensive, time-consuming and costly.

Instead, experienced investors looking for more hands-off access to the residential housing market may be more attracted to opportunities to back entire developments and aid in tackling the UK’s housing crisis with the likes of property bonds

Whether it’s small, exclusive developments, or larger developments – including everything from affordable housing to high-end luxury homes – you’re interested in helping to finance, there is usually a property bond suitable. What’s more, it’s also possible to invest into property bonds that are financing developments in a specific location, a feature that will be particularly attractive to investors with a focus on providing a boost to an area of interest in both a societal and economic sense. 

As an example, experienced investors from the North East could choose to back the delivery of developments in their own region. This would not only help small and medium-sized housebuilders build much-needed high-quality homes amidst decades of undersupplied demand, but also create and support local jobs at a time the UK’s unemployment rate sits at 4.7%, 0.8 percentage points higher than pre-Coronavirus pandemic. 

And as Warwick Estates found that the highest new-build premium – with new-build houses selling for 21% more than existing homes across the nation – is in fact in the North East at 53%, now could be a better time than ever for experienced investors to consider the region as an investment prospect.  

Further to these opportunities to invest for passion with property bonds, the asset can also be attractive to experienced investors in the more typical ways, with inflation-beating target returns often between 4% and 8% and the potential to be entirely tax-free when invested into via an Innovative Finance ISA (IFISA).

 

Using alternative investments to invest for passion

Whilst the potential returns on offer and how an asset will fit within your wider portfolio are both crucial factors when considering an investment, experienced investors are increasingly searching for opportunities to contribute their capital towards an asset that they’re passionate about. 

The scope of alternative investments makes this achievable for many experienced investors, with options to back small businesses, scale environmental projects or aid in delivering high-quality housing to name just a few.