If you’ve ever heard us talk about private credit, private equity, or hedge funds—congratulations—you’re already hearing about parts of the “alternatives” landscape. But what you may not know is how these seemingly distinct investment vehicles fit together under a broader strategy designed to diversify portfolios, smooth out volatility, and deliver attractive returns over time.
What Are Alternative Investments?
Alternative investments include assets that fall outside traditional public markets like stocks and bonds. These include:
- Private Equity (ownership in private companies)
- Private Credit (non-bank lending strategies)
- Real Estate (core and non-core)
- Hedge Funds (tactical, often market-neutral strategies)
- Venture Capital (early-stage company investing)
- Infrastructure, Commodities, and more
Unlike public equities, these investments are typically less liquid and often reserved for institutional or qualified investors. But they can offer powerful tools to build wealth—especially when approached thoughtfully.
Why Invest in Alternatives?
The short answer: diversification, return potential, and risk mitigation.
- Diversification: Alternatives behave differently from public stocks and bonds. When public markets are under stress, many alternative strategies can preserve value or even thrive.
- Return Potential: Over time, many alternatives have outpaced public markets—particularly in private credit and equity where inefficiencies and access constraints still allow skilled managers to generate outsized returns.
- Access to Innovation & Real Assets: Venture capital and private equity offer exposure to groundbreaking innovation before companies go public, while real estate and infrastructure provide inflation-sensitive income streams.
Not All Alternatives Are Created Equal
The chart below (based on 10-year returns through 2024) shows the dispersion of outcomes within each asset class. In simple terms: manager selection matters—a lot.
Notice how in Global Private Equity, the difference between the top and bottom quartile managers is over 25%. That’s a massive gap. The same goes for venture capital and private credit. These are spaces where due diligence, access, and experience can make the difference between strong returns and disappointment.
What to Watch Out For
- Vintage Risk: When you invest in an alternative fund matters. Just like planting grapes before a drought can affect the vintage of a wine, committing capital in overheated markets can impair returns. We pay close attention to market cycles and manager pacing to mitigate this.
- Liquidity Constraints: Alternatives often have multi-year lockups. They shouldn’t replace your liquid savings—but they can anchor your long-term capital.
- Complexity & Fees: Some alternative funds carry layered fees or lack transparency. That’s why we vet everything thoroughly before recommending it.
Our Role in Your Portfolio
We are actively curating select institutional opportunities across the private markets universe—many of which are not broadly available to individual investors. A significant number of our clients now have targeted exposure to private debt, private equity, and real estate through strategies we source, diligence, and monitor closely.
We do this with a clear framework: fit, timing, structure, and role in the broader plan.
If you’re wondering whether more exposure to alternatives makes sense in your portfolio—or if you’re sitting in too much cash or public equity—reach out. We’re happy to review how and where private investments might help.
Bottom Line:
Alternatives aren’t just for Ivy League endowments anymore. But investing well in them still takes access, expertise, and a process you can trust. That’s what we’re here for.
Let us know if you’d like to discuss private market opportunities further—we’re just a call away.
Contact your Park City Financial Advisors today!
