The Alternative Asset Classes
Private equity: direct business ownership at scale. Infrastructure: toll roads, utilities, airports. Commodities: physical assets, supply constraints. Crypto/Digital: emerging asset class with asymmetric returns. Real assets: metals, agriculture, natural resources.
When to Use Alternatives
When public markets are overvalued. When seeking specific return profiles. When diversifying beyond traditional assets. When accessing manager expertise in specialized sectors. Alternatives often have higher fees, lower liquidity, higher minimum investments. Only use when specific purpose justifies trade-offs.
The Portfolio Role
Alternatives 10-30% of sophisticated portfolio. Core 70-90% traditional stocks, real estate, bonds. Alternatives add diversification and enhance returns but require additional expertise and time.
Alternatives can enhance returns but require discipline.