What are Alternative Investments?

What are Alternative Investments?

Alternative investments are exactly what they sound like; they are alternatives to traditional investments. When I was in school, I was told that your money should be in equities (stocks), fixed-income (bonds) or money markets (basically in the bank).

Now we have this whole other class that diversify you away from these traditional asset classes.

These alternative investments include

– Private Equity
– Venture Capital
– Infrastructure (highways, airports, utilities, etc)
– Real Estate (retail, office, residential, etc)
– Timberland
– Managed Futures
– Hedge funds

More and more investors have been increasing their allocation to alternative investments. Alternatives give you increased diversification and enhanced return.
Let me give you an example of investors have a decent portion of their allocation in alternatives:

The top ten pensions in Canada have a thirty two percent allocation to alternatives.

These top ten pension in Canada have a trillion dollars in assets, which would mean their alternative asset allocation is over three hundred and twenty billion dollars.