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4 Alternative Asset Classes to Consider Right Now

If you’re looking for alternative investment options outside of the traditional stock and bond markets, you’re in luck. There are a number of great alternative asset classes to consider right now. In this post, we will discuss four of the best options for advisors and investors to consider right now: private equity, real estate, hedge funds, and private debt.

1. Private Equity

Private equity is one of the most popular alternative investment options out there. It is a type of investment that allows investors to purchase stakes in private companies. These investments can be incredibly risky, but they can also offer high returns if the company does well.

Private equity firms typically require a significant amount of capital to get started, so this option may not be available to everyone.

Young, wealthy investor allocating to alternative investments.
Source: Unsplash

2. Real Estate

Real estate is a great alternative investment option, especially for investors who are looking for stability and steady returns. Real estate can be a great hedging tool against inflation, and it can also provide portfolio diversification.

There are a number of different ways to invest in real estate, including through real estate investment trusts (REITs), real estate funds, and direct investment in property.

Source: Unsplash

3. Hedge Funds

Hedge funds are a type of alternative investment that can be used to stabilize a portfolio and provide protection from market downturns. They are typically invested in a variety of assets, such as stocks, bonds, and commodities, which helps to reduce the overall risk of the fund. Hedge funds can be a great option for investors who are looking for ways to protect their portfolio during times of market volatility.

4. Private Debt

Private debt is a type of alternative investment that involves lending money to businesses or individuals. This can be done through private lending platforms, or by investing in private debt funds. Private debt has been growing in popularity in recent years, as investors are looking for alternative ways to earn high returns with low risk.

In addition, private debt investments are generally less correlated with the stock market than other alternative investment options, making them a more attractive option for investors looking to reduce their overall portfolio risk. Finally, the returns on private debt investments have been relatively stable in recent years, making them a more attractive option than traditional fixed-income investments.

There are a number of benefits to investing in private debt:

– High yields: Private debt typically offers higher yields than traditional investments, such as stocks and bonds. This is because private debt is a relatively riskier investment, and lenders are compensated for that risk with higher returns.

– Diversification: Private debt can provide investors with diversification benefits, as it is not correlated with the stock market. This can help reduce your overall portfolio risk.

– Liquidity: Private debt investments tend to be more liquid than alternative investment options like real estate or private equity. This means that you can sell them more easily if you need to access your funds quickly.

However, there are also some risks associated with private debt:

– Default risk: The main risk with private debt is default risk – the chance that the borrower will not repay the loan. This is why it is important to carefully research any potential investments and only lend to businesses you trust.

– Credit risk: Another risk associated with private debt is credit risk – the chance that the borrower will not be able to repay the loan due to changes in their financial condition. This can be mitigated by only investing in high-quality borrowers, but it is still something to be aware of.

Managing Alternative Assets

As advisors and investors begin to allocate more to alternative investments increases, portfolio reporting and management complexity will increase, calling for more advanced aggregation services like AltExchange.

AltExchange eliminates common pain points including fragmentation, unstructured data, scattered documents, limited performance visibility, inability to track and bill on alternatives, and more. With AltExchange, advisors can easily offer, track, report, and bill on alternative investments.

If you’re an advisor or investor looking for a full-solution alternative investment management and reporting solution, please get in touch.

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