By Brian Spinelli, CFP®, AIF®, Co-Chief Investment Officer
Originally published August 3, 2022; updated January 2026
Alternative investments have continued to gain momentum. It can be argued they have become mainstream. Global alternative assets under management (AUM) have grown from about $4.8 trillion in 2003 to $22 trillion in 2023—and exceeded $33 trillion in 2025.(1, 2) As a comparison, the MSCI ACWI Investable Market index of 99% of global public stocks had about $101T in assets in 2025.(3)
In this blog, I’ll review the fundamentals of alternative investments including major categories and a broad overview of benefits and risks, and touch on some reasons why these areas are seeing such burgeoning growth in investment capital.
Key Takeaways
- Alternative investments are becoming mainstream. Assets like private credit, real estate, and private equity now play a larger role as more companies stay private and access expands beyond institutions.
- Alternatives can enhance diversification and income, but add complexity. These investments often behave differently than stocks and bonds, but typically involve higher fees, less liquidity, and greater manager dispersion.
- Access is improving, but due diligence matters more than ever. New structures like interval funds and evergreen vehicles lower barriers, making careful evaluation of risk, liquidity, and fit essential.
- Alternatives work best as portfolio tools, not stand-alone solutions. Their role should align with an investor’s time horizon, liquidity needs, tax profile, and overall financial goals.
- A diversified approach within alternatives can reduce risk. Spreading exposure across strategies, managers, and return sources helps manage uncertainty in private markets.
What counts as an “alternative” investment?
What are alternative investments? Any financial asset outside traditional publicly traded stocks, bonds, and cash tends to get lumped under this category.
This universe spans private equity and venture capital, private credit, real estate and infrastructure, hedge funds, commodities, reinsurance, digital assets, and collectibles. I still question why real estate continues to be considered an alternative investment when it’s been around a lot longer than “traditional” financial assets. The alternatives list is much broader than this, but these are the major .
Access and adoption by individual investors has grown through interval funds, evergreen vehicles, non‑traded BDCs, and tokenized platforms.
Alternatives typically offer:
- Lower liquidity and transparency
- Distinct risk and return drivers
- Different return paths versus traditional assets
Why consider alternatives in managing an investment portfolio?
- Diversification: Alternatives typically have low correlation to public markets, which can help improve portfolio resilience.
- Income: Alternatives such as private credit and real estate/infrastructure strategies can provide attractive income and serve as a complement to traditional bonds.
- Private‑market growth: Many U.S. companies remain private, offering investment exposure beyond what public markets offer. Please see the following chart that shows the number of U.S.-listed companies over time—trending lower—versus how market capitalization has increased over this period.
Types of alternative investment strategies
Private Equity and Venture Capital
Private equity invests in businesses that are not listed on public exchanges. Here’s a data point: Fewer companies are publicly traded on U.S. markets than 30 years ago. Many companies are choosing to stay private; the trend has been to remain so for longer before listing on the public markets.
Venture capital generally is a form of private equity, but tends to focus on early stage companies rather than more mature businesses.
Private Credit
This category covers lending activity and spans multiple areas. Examples include companies borrowing money from investors outside of using traditional banks—or issuing public bonds for financing. Private credit also includes private loans backed by real estate, infrastructure, physical assets and financial assets as collateral.
Real Estate & Infrastructure
Real estate is by far the largest asset class in the world. Owning private real estate can yield rental income and appreciation potential. Infrastructure covers assets that are essential for moving people, goods and resources across global economies. Examples include power generation, data/communication, transportation, and water and waste facilities.
Hedge Funds & Liquid Alternatives
These types of alternatives have a host of investment strategies housed under this category. Trading strategies such as global macro, equity hedge, and relative value are just a few examples. Hedge funds are usually private pools of capital requiring investors’ capital to be illiquid for a period.
Liquid alternatives is also a broad term. In many cases, these instruments replicate trading strategies employed by hedge funds, but in a daily liquid format.
Commodities
From metals (like gold and silver), to oil and gas, to agricultural commodities (such as corn and lean hogs), these assets can be invested in multiple ways. For example, gold can be held physically, owned through an exchange-traded fund or even through option strategies.
You likely will encounter more forward and futures contracts in this area, as investors typically are looking to either profit from price increases or protect themselves from price declines. For example, a producer of corn might use these contracts to lock in prices of a crop to be delivered at a future date to protect against a price drop upon harvest. Commodities are widely viewed as hedges against unexpected inflation.
Reinsurance
This is commonly known as insurance purchased by insurance companies. Investors can gain exposure to this potential profit stream through more liquid instruments known as catastrophe bonds, or through more illiquid vehicles that participate in private contracts.
Reinsurers work with insurance companies to help them diversify their risks and allow for more underwriting capacity. In exchange for taking on the risk, the reinsurers get paid a premium, similar to how an individual pays an insurance company for home and auto protection. This area of investment is not dependent on how traditional assets behave and historically has no correlation to traditional markets.
Digital Assets & Tokenization
Crypto is a common term heard in reference to this area of alternatives, although crypto truly represents just one area of digital assets—cryptocurrencies (e.g. bitcoin).
Digital assets span many areas, from bitcoin to tokenized assets exposed to real estate, stocks, collectibles and art. Institutionalization—accelerated by exchange traded fund (ETF) approvals and platform growth—has been fueling investor flows into digital assets and expanding tokenized real‑asset opportunities.
Looking at just U.S. listed bitcoin ETFs, AUM sits around $114B currently. These became available to investors just two years ago in January 2024. The average annual net inflows into these ETFs has averaged close to $35B over the last two years.
Access to alternative investments has been changing
Retail and high‑net‑worth investors now access alternatives through interval funds, evergreen structures, and non‑traded BDCs (business development companies). While many of the barriers to entry are decreasing, investors should assess the risks of each and how they can positively or negatively impact their existing portfolio.
Risks in underwriting alternatives
- Liquidity: Many alternatives involve long holding periods—and can’t be turned into cash in a moment’s notice.
- Valuations: These can be delayed and not priced regularly like traditional assets.
- Manager dispersion: Outcomes vary widely; due diligence is critical. In the chart directly below, please note how narrow manager outcomes tend to be in more traditional areas such as large U.S. stocks and bonds. As you move left to right (with the exception of core real estate!), the outcomes become much wider in the alternative space, requiring careful consideration on accessing each area.
- Fee structures: These tend to be higher for alternatives; because of this, it can be challenging to make an apples-to-apples comparison to traditional assets with lower management fees.
Our approach to alternative investments at Halbert Hargrove
Our approach favors diversification even within alternatives. Rather than anchoring to one area, we seek to achieve many different return sources and managers to help mitigate many of the risks discussed above. The way we apply alternatives in portfolio construction is always specific to your uniqueness as an investor. There are numerous factors to evaluate, including your eligibility, personal views on risk, liquidity tolerance, tax profile, and time horizon when we weigh these investment positions and their appropriateness for your portfolio.
The bottom line? Alternatives aren’t an end‑all/ be-all for investors—they are portfolio tools in a vast toolkit. In 2026, the opportunity set is broad (private credit, real assets, private equity), and access is better—with more options to consider as diversifiers to traditional investments. We welcome conversations with you about the positions that make sense for your life goals.
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Alternative Investments are a diverse class of investments. The risks vary greatly. Certain Alternative Investments are very speculative and highly risky and are only appropriate for those that understand and are willing to assume the risks. Investors in Alternative Investments are provided with documents with additional information from the issuer, including the risks involved in that particular investment. Investors should read those documents carefully before investing.
