Alternative investments are any assets that sit outside the traditional trio of stocks, bonds and cash. Once the preserve of institutions and the very wealthy, they are now an increasingly important part of how experienced investors build diversified portfolios.
In this guide we explain what alternative investments are, the most common types, and why so many investors are adding them to their portfolios.
What Counts as an Alternative Investment?
The term covers a broad and varied group of assets. What they have in common is that their performance is driven by different factors from mainstream stock and bond markets, which is exactly what makes them interesting.
The Main Types of Alternative Investment
- Property and property bonds: investing in residential, commercial or development property, either directly or through bonds secured against real estate
- Private equity: owning a stake in private companies that are not listed on a stock exchange
- Early-stage and EIS investments: backing young, high-growth businesses, often with valuable tax reliefs
- Commodities and precious metals: gold, silver and other natural resources, including mining projects
- Renewable energy and infrastructure: solar, wind and battery storage projects that support the transition to clean energy
- Social housing and assisted living: property that meets a real social need, often backed by long-term leases
- Loan notes and fixed income: lending to businesses in return for an agreed rate of interest over a set term
Why Do Investors Choose Alternatives?
Diversification. Because alternatives do not always move in step with stock markets, they can help spread risk across a portfolio.
Return potential. Many alternatives target higher returns than traditional savings, reflecting their higher risk and longer time horizons.
Tangible assets. Property, energy infrastructure and commodities are real assets that many investors find easier to understand than abstract financial products.
Purpose. Areas such as renewable energy and social housing let investors put their capital to work in projects with a positive impact.
What to Consider Before Investing
Alternative investments are generally less liquid than listed shares, which means your money may be committed for several years. They are often unregulated, and many are only suitable for sophisticated or high-net-worth investors who understand the risks involved. The best approach is to research each opportunity carefully, look closely at the people and assets behind it, and only invest an amount you can afford to have tied up. A common rule of thumb is to keep high-risk investments to no more than 10% of your total investable wealth.
How New Capital Link Can Help
New Capital Link introduces sophisticated and high-net-worth investors to a wide range of alternative opportunities across these sectors. We provide clear information on each opportunity so investors and their advisers can make confident, well-informed decisions. Explore our alternative investments page to find out more.
Important Information
This article is for general information only and is not financial, tax or legal advice. Alternative and early-stage investments are high risk: you could lose all the money you invest, returns are not guaranteed, and you may not be able to sell your investment quickly. Tax treatment depends on your individual circumstances and may change. Please read our risk warning and consider taking independent financial advice before investing.
