Why Allocate to Alternative Investments

Aaron Ammerman |

The Case for Alternative Investments

Alternative investments provide access to investment opportunities generally not available in a traditional stock/bond portfolio allocation. With enhanced return and income potential, and a wide array of diversified strategies, alternative investments can be a valuable addition to a portfolio. They can also be highly effective when the markets are experiencing greater volatility, higher inflation, and increased correlations in traditional assets.

What Can Alternative Investments Offer?

    • Alternative investments have historically delivered higher returns and income than traditional equity and fixed income investments.
    • Alternative investments span multiple asset classes and investment strategies, helping to dampen volatility, increase diversification, and lower correlation in a portfolio.
    • Alternative investments offer exposure to an array of unique investment opportunities away from long-only, publicly traded stocks and bonds.


  • May help investors achieve long-term investment goals and objectives and serve as an attractive complement to traditional stock/bond allocations.
  • Do not represent a single solution, but a diverse set of strategies that can fulfill multiple roles in a client's portfolio.
  • Versatile tools for building diversified portfolios.
  • Technology and product innovation have made it easier for investors to access these investments. 

Key Risk Considerations

Key risk considerations may include, but are not limited to, the following:

  • Transparency: Alternative investments may not offer the same level of transparency as traditional
    investments, which are required to provide frequent and full disclosures
  • Liquidity: Alternative investments should be considered longer term investments. Depending upon
    the strategy, investors may be subject to a lockup period which will prevent them from redeeming their
    capital for an extended time (e.g., 5-10 years).
  • Fees: Alternative investment fees are generally higher than those associated with traditional investments.
  • Leverage: Alternative investment strategies may use some form of leverage, which offers the potential
    for higher returns, but also increases the downside risk.
  • Concentration: Alternative investment strategies may be highly concentrated in a few funds or holdings.

View the PDF below to read more about allocating to alternative investments!