DarcMatter: Redefining Alternative Investment

DarcMatter: Redefining Alternative Investment

An alternative investment or alternative investment fund (AIF) is an investment in asset classes other than stocks, bonds, and cash. The term is a relatively loose one and includes tangible assets such as precious metals, art, wine, antiques, coins, or stamps and some financial assets such as real estate, commodities, private equity, distressed securities, hedge funds, carbon credits, venture capital, film production, financial derivatives and cryptocurrencies. Investments in real estate, forestry and shipping are also often termed “alternative” despite the ancient use of such real assets to enhance and preserve wealth. Alternative investments are to be contrasted with traditional investments.

The financial crisis, when virtually all financial assets except Treasury bonds fell dramatically, gave life to the so-called liquid alt funds industry. The funds invest in a wide variety of alternative assets and hedge fund-like strategies intended to not correlate with the returns on stocks and bonds. With such investments formerly available only to institutions and high-net-worth individuals, retail investors flocked into the hundreds of funds that were launched since the crisis.

Total assets in the alt funds stood at $223 billion at the end of March, with inflows of $1.9 billion for the month after falling about half a billion in February. Last year the category took in $4.8 billion in new money and another $5 billion in January.

Problems with the Industry

The truth is that alternative investments are not a panacea for conditions of market volatility and corrections because of the lack of diversification, over concentration, use of derivatives and leverage, lack of appropriate benchmarks to analyze performance. Some other reasons for wariness include the following risks and problems associated with alternative investments:
Illiquidity (Although ETFs are market traded, niche, leveraged and inverse leveraged ETFs may have significant liquidity problems. Non-traded alternative investment products, such as non-traded REITS, are illiquid)

These complex, non-conventional products lack transparency in pricing and operation, and are often not fully understood by the investor or the seller, as evidenced by the seller’s inability to explain how the investment works to an arbitration panel.

Valuation problems (Traded ETFs often trade at significant premiums or discounts. Non-traded alternative investments are valued using models and guesswork, and sometimes are fraudulently valued.)

Alternative investments remain on regulators’ radar screens because of these inherent problems and because of sales and practice violations. The Financial Industry Regulatory Authority (FINRA) has long been concerned with sales practices relating to alternative investments.

The DarcMatter solution

The platform is created with investors in mind, particularly those with interest in alternative investment, to help them tackle issues of inefficiency and the lack of transparency that have shrouded the sub-sector. It is tapping into the blockchain technology to achieve it. This is encapsulated in the vision of the enterprise which is to enhance capital flow, transparency, and efficiency for investors and asset managers.
The project has a great team, with the passion necessary to drive the project, they do have deep financial, technical and operational expertise.

Then there is the DarcMatter coin (DMC) which is a utility token that will give access to investors and fund managers to create smart contracts for the investment completion process. It will also be used for a permissioned blockchain, and will use systems that operate locally on the NEM blockchain.

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