What are the main advantages of alternative investments?
- Highly diversified from traditional markets, alternative investments tend to have a lower correlation with listed stocks and bonds, which can reduce overall portfolio volatility. For example, real estate, infrastructure, or private equity may perform differently from liquid stock markets during certain periods of market stress.
- Another advantage is the potential for higher long-term returns. Alternative funds often target the "illiquidity premium" (you receive additional returns for the fact that your money is locked up) and exploit less efficient markets, such as unlisted companies or specialized real estate projects. Private equity strategies, for example, seek to increase the value of companies through active management, restructuring, and operational growth.
- Another advantage is access to strategies and markets that would otherwise be difficult to access. Thus, through alternative investment funds, you have access to types of investments that, as an individual, would be difficult or almost impossible for you to manage directly: loan portfolios, infrastructure projects, complex derivative transactions, direct financing of companies.
- Last but not least, customization of the risk-return profile. Certain alternative investment funds are designed for recurring income (e.g., lending or real estate funds with rents), others for aggressive growth (private equity, venture capital), allowing for fine-tuning of your portfolio according to your objectives.
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