ALTERNATIVE INVESTMENT NEWS & TRENDS

Commodities Benefiting from Market Swings

More investors are taking a hard look at commodities as many of the traditional asset classes keep taking a pounding.

A recent study by Alternative Investment Analytics concluded that commodities do well when the markets decline. It found that "each of three commodity indices…all performed well on average during the month in each year that the S&P 500 had its worst performance."

The study concluded, "Commodity indices may provide diversification benefits during periods of stress in global equity markets."

A recent report in The Economist seemed to reach a similar conclusion. It noted that oil and gold prices aren't the only ones taking off. "Copper, lead, soybeans, wheat, cotton, coffee, cocoa, and feeder cattle had all registered double-digit percentage gains this year."

The report traces the rise of commodities as an alternative class dating back to the dot.com bubble burst and the availability of a whole series of exchange-traded funds based on commodities now accessible to a broader range of investors.

Commodities appear to have gotten a boost from market gyrations and the credit crunch, as money normally earmarked for high-yield bonds and structured credit sought out new investment vehicles.

Some words of caution: "individual commodity prices are still highly volatile thanks to speculative demand."

www.alternativeanalytics.com, The Economist, 10/20/07)

Too Soon to Write off Real Estate: Global REITS may be an Option

Investors seem to be avoiding domestic real estate, and for good reason. But real estate overseas, that's another story. The easiest way to invest in hot overseas real estate markets is via select REITS. REITS, of course, are real estate investment trusts that trade like stocks on major exchanges. They invest in office, retail, industrial, apartment and other properties that generate income and pay out most of their earnings as dividends.

Not long ago, REITS were hard to find outside the U.S. and some other developed countries. Now over 30 countries have REIT-type investment vehicles.

Up until recently, REITS have been a popular investment in the U.S., having grown to more than $300 billion in 2007. Over the last three years, domestic REITS have had an annualized return of over 15%. But domestic REITS took a tumble and plunged 21.6% on average between Feb. 1 and July 31 this year.

The big advantage to investors of seeking REITS in foreign markets is diversification. Since real estate is affected most by local economic issues, a hit to U.S. stock prices will not necessarily adversely affect real estate overseas.

"We're seeing great interest from our high net worth investors who want a global approach to real estate allocation," says Joe Azelby, global head of real estate and infrastructure at JP Morgan, in a recent WSJ article.

More countries are taking advantage of investor interest in global real estate by offering tax beneficial REIT structures.

Some of the benefits of global REIT investing are diversification and possible growth.

"On the other hand," says Bruce Eidelson, director of real estate portfolio management for Russell Investment Group, "many REIT funds are fairly young with limited performance histories on which investors can base decisions." In addition, he points out in a report for Financial Planning, investors in international REITS also face the other risks of international investing such as geopolitical issues.