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Interest in alternative investments has grown significantly as investors look beyond traditional stocks and bonds for return, income, and diversification. Once reserved for institutions and high-net-worth individuals – due to high minimums, complexity and eligibility – alternative investments are increasingly accessible to a broader set of investors in innovative investment vehicles.
Alternative investments – or ‘alts’ – refers to asset classes outside of traditional stocks and bonds such as private equity, private credit, real estate, infrastructure, and hedge funds. Most of the investment strategies tend to be less liquid than their public market counterparts and require a longer investment horizon.
Many alts follow a different process than traditional investments. Private equity and credit funds often use a “drawdown” structure, where capital is committed to the fund then called over time. Hedge funds typically require full funding at investment and offer periodic redemptions after a lock-up period. Registered funds, also known as “semi-liquid” or “evergreen” funds offer enhanced investor protections such as SEC-oversight, enhanced liquidity requirements and greater transparency and may have unique fee and access terms.
Understanding the investment lifecycle, liquidity features, and cash flow expectations is essential before investing.
Traditional private market drawdown funds typically follow four stages:
This process can span seven to 10-plus years. Early returns often follow a “J-curve” pattern: negative at first, then positive as investments mature. Evergreen funds operate continuously, offering partial liquidity options at intervals.
Alternative Investment Strategy Categories
| Category | Description |
| Private Equity | Invests in private companies to drive growth (e.g., venture, growth, buyouts). |
| Private Credit | Provides direct loans or credit to borrowers that have difficulty obtaining credit otherwise. Includes direct lending, asset-backed loans, and distressed credit. |
| Real Assets | Tangible investments like real estate, infrastructure, and natural resources that may offer income and inflation protection. |
| Hedge Funds | Uses flexible strategies (ex. long/short, leverage, derivatives), wide exposure (stocks, bonds, currencies, commodities) or catalysts to generate returns across market cycles. |
While alternatives carry unique risks, they can enhance returns and diversification beyond traditional investments.
Implementation Insight: For investors seeking enhanced returns and downside protection, exposure to alternatives can be a compliment to a traditional 60/40 portfolio.
While alternatives can enhance portfolios, they also come with unique risks that require careful evaluation.
Implementation Insight: Because alternatives often involve longer lock-ups and complexity, investors should ensure these strategies align with their liquidity needs and long-term goals.
| Myth | Fact |
| Only institutions can invest in alts. | Access is expanding through feeder funds and evergreen structures for individuals. |
| Alts are too risky. | Risk varies by strategy; some are less volatile than public equities. |
| They’re not worth the high fees. | Net-of-fee returns can be compelling, but should be considered within the context of the investor’s goals and risk tolerance. |
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ALTERNATIVE INVESTMENTS ARE CONSIDERED COMPLEX PRODUCTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. Prospective investors should be aware that an investment in an alternative investment is speculative and involves a high degree of risk. Alternative Investments often engage in leveraging and other speculative investment practices that may increase the risk of investment loss; can be highly illiquid; may not be required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as mutual funds; and often charge high fees. There is no guarantee that an alternative investment will implement its investment strategy and/or achieve its objectives, generate profits, or avoid loss. An investment should only be considered by sophisticated investors who can afford to lose all or a substantial amount of their investment
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