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Alternative funds tend to invest in asset classes other than bonds, stocks or real estate. These alternative assets might be art, antiques, wine and Australian sporting memorabilia. Other types of alternative assets might be distressed securities, carbon credits, private equity and financial derivatives. Alternative funds are sometimes used as a diversification tool for investors and to have a low correlation exposure to the market. Some of the characteristics of alternative funds are high cost of purchase, market value and some of the investments can be illiquid.

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