THE ALTERNATIVE UNIVERSE

Exotic alternative investment options like asset leasing and invoice discounting represent the next frontier for those chasing high returns. But, as is often the case, the risks are elevated, too

- TEENA JAIN KAUSHAL

THE WORLD OF investing has always subscribed to the age-old adage of ‘higher the risks, greater the rewards’. This mantra suggests that those willing to take on substantial risks stand a chance of earning sizeable returns. In the increasingly adventurous world of investments, fixed deposits have long been a favourite among conservative investors due to their stability and low risk. But, with inflation inching higher, coupled with the need to generate significant returns, alternative investments with higher returns have started gaining traction.

The new buzzwords in alternative investment products are asset leasing and invoice discounting, which offer annual returns of up to 20 per cent. But it’s important to remember the caveat such instruments carry: the higher risks involved. Not only does this put the spotlight on the shift in investment avenues that can satiate investors’ heightened appetite for more risk, it also signals a deviation from the earlier focus on traditional instruments like fixed deposits and bonds, among others. These new alternative investment avenues demand a leap of faith from investors. But how do they work and what are the risks?

THE AVENUES

Before the outbreak of Covid-19, exotic investments were usually the sole preserve of high net-worth individuals. But the fixed income market in India has undergone a sea change since then, with these products becoming readily available to retail investors, thanks to the rise of fintech platforms dealing in them.

Take invoice discounting, for instance. The Reserve Bank of India (RBI) recognises it solely through its Trade Receivables Discounting System (TReDS) platform. But, TReDS does not accommodate retail investors. Eyeing this opportunity, fintech firms have launched innovative products that allow retail investors to participate.