What role do alternative investments play in a portfolio?
- Diversification and total risk reduction. For a portfolio dominated by listed stocks and bonds, introducing a moderate weighting of alternative investment funds (real estate, private equity, infrastructure, private credit, commodities) can reduce volatility and improve the risk/return ratio due to lower correlations with traditional markets.
- Then, capturing the illiquidity premium. Investors willing to lock up capital for longer terms are "paid" through potentially higher returns compared to fully liquid investments. Alternative investment funds are an institutionalized way to access this premium.
- Alignment with specific objectives. Whether we are talking about income: real estate or lending funds can provide periodic cash flows (rents, interest), growth: private equity, venture capital, or funds focused on aggressive growth, or inflation protection: certain alternative investments (real estate, infrastructure, commodities) may have returns positively correlated with inflation, helping to protect purchasing power.
- Strategic role in wealth planning. Internationally, consortia such as CAIA and CFA Institute emphasize that alternatives are becoming a standard component of diversified portfolios for long-term investors, not just an "exotic add-on." In Europe, the AIFMD framework provides a common framework for their integration into wealth management.
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