There are also numerous subcategories that represent different approaches to each strategy.

Digital assets, or cryptocurrencies, such as bitcoin, are designed to work as mediums of exchange that are stored on a decentralized ledger known as a blockchain.

Real assets encompass a diverse range of assets including private real estate, fine art, collectibles, commodities, and investments in infrastructure, such as bridges, highways, pipelines, airports, and data centers.

The borrowers are typically small and mid-sized private companies while the lenders may be institutions or asset management firms. This can include direct lending, whereby investors lend money directly to private companies.

Private credit, like private equity, generally refers to investments that are originated or negotiated privately, are not traded on public markets, and are often composed of higher-yielding securities.

Unlike traditional public equity, private equity investors typically need to hold an investment for multiple years to gain value before exiting positions. Investors can make direct investments in a private company or invest in a private equity fund.

Private equity is, in general, the investment in companies that are not traded in public markets.

Hedge fund strategies often invest in public equities and bonds, but may also hold privately held assets or derivatives (financial instruments based on agreements or contracts and whose value is tied to an underlying asset, instrument, or index), with the goal of generating returns that are uncorrelated to traditional asset markets.

While not an exhaustive list, what follows is an overview of the alternative investment landscape:

Generally, there are 5 main categories of alternative investments. With that in mind, it's important to note that there can be more risks associated with these relatively complex investment types and that they are not suitable for all investors.Īs the name implies, alternative investments (alternatives), are those that do not fall into one of the conventional investment categories of stocks, bonds, and cash. But with a more comprehensive understanding of the range of alternative investments and their key attributes, investors may be better equipped to determine which, if any, may be appropriate for their portfolios. But asset managers have accelerated their efforts to develop and offer innovative investment vehicle structures that can grant a broader spectrum of investors access to alternatives-some in the form of mutual funds and exchange-traded funds (ETFs).īecause of their exclusivity, some investors have felt that alternatives were too complex or too cumbersome for their portfolios or were not convinced that the historical returns and risk attributes of these investments made it worth their while. This lack of access to alternatives has been one of the major roadblocks to their widespread adoption. Additionally, alternatives are generally less liquid (that is, not as easy to buy or sell) than traditional investments, which has made access to them more complicated. For many years, alternative investment strategies were largely available only to these institutional investors.

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