Millennium Trust Company, a leading custodian of mom and pop investment retirement accounts, is engaging alternative investments with a mission: allow average investors to gain exposure to sophisticated strategies that are not simply correlated to long stock exposure.

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Custodians weigh cutting edge topics targeting alternative investments

In releasing three new white papers, each targeting alternative investments, one of the nation’s top investment custodians is weighing in on some very cutting edge – if not controversial – topics.

For instance, the firm’s white paper, “New Opportunities in The Alternative Asset Market Place: Peer to Peer Lending,” the custodian firm tackles what has been a cutting edge if somewhat controversial practice.  Peer to peer lending seeks to dis-intermediate banks from the lending process, to various degrees, connecting borrowers in need of funding directly with investors seeking an appropriate yield.

Alternative investments at an inflection point

The report, which explores many of the in and out details of online peer to peer lending sites, notes the industry is at an inflection point. “The returns earned by relatively small, individual investors from peer to peer lending have now drawn the attention of advisors, institutions and large investment industry players,” the report states. In other words, rather than retail investors looking for opportunities institutional investors jealously guard, the trend is reversed and institutional heavies are now looking to the mom and pop investors profiting from peer to peer lending as a source of return.

Peer to peer lending has been viewed in some quarters as a risky, new alternative strategy. The investor’s gain is strictly limited to the interest rate, whereas the loss can be 100% creating a negative risk/reward ratio. Vetting various loan opportunities can be tricky, critics say.  The probability of gain or loss is impossible to define because the system is too new to have been adequately stress tested.  But despite these doubts, real investors have been generating real return in the new alternative investment category.

The primary focus of most study of peer to peer lending has been how the new investment arena impacts establishment banking practices. The short Millennium white paper, however, considers how the industry’s service providers are addressing a growing need to seek new forms of yield in a quantitatively controlled interest rate market.

Alternative investments: Crowd funding

The second white paper tackles another controversial alternative investments topic: crowd funding.  In the white paper “New Opportunities in the Alternative Asset Market Space: Crowdfunding,” Millennium examines how investors can by pass the long established system of going to local banks or Wall Street to gain exposure to early stage start-ups.

The third white paper, which addresses the more traditional alternative asset space, discusses how technology is changing the alternative landscape and offering new platforms and technical services to manage alternative investments.