For decades, portfolios were built on two pillars: equities and bonds. That model is no longer sufficient. As global markets have grown more interconnected and traditional returns have compressed, investors - from sovereign wealth funds to high-net-worth individuals - have increasingly turned to alternative investments to diversify their holdings, access new return streams, and manage portfolio risk more effectively.
According to Preqin's Alternatives in 2025 report, global alternative assets under management now exceed $16 trillion, having more than doubled over the past decade. This growth reflects a structural shift in how capital is allocated worldwide.
Alternative investments are any investment that falls outside the conventional categories of publicly traded stocks, government bonds, and cash. They include a wide range of strategies, structures, and asset types - from private company ownership to direct lending, from hedge fund trading strategies to structured financial instruments.
What unites them is their distinction from traditional public markets:
| Characteristic | Traditional Investments | Alternative Investments |
|---|---|---|
| Liquidity | Daily trading on public exchanges | Illiquid or semi-liquid - lock-ups common |
| Pricing | Continuous, transparent, market-driven | Periodic valuations or model-based pricing |
| Regulation | Heavily regulated (securities laws) | Lighter regulation, often limited to qualified investors |
| Access | Open to all investors via brokers | Typically restricted to institutional or accredited investors |
| Return drivers | Market beta, dividends, coupons | Manager skill, operational value, illiquidity premium |
Alternative investment funds are the vehicles through which investors access these strategies. They are typically structured as limited partnerships, with a fund manager (General Partner) making investment decisions and investors (Limited Partners) providing capital. Fund terms - including fees, lock-up periods, and reporting obligations - are governed by a legal agreement established at inception.
The alternative investment landscape encompasses several major asset classes. Below is a brief overview of each; for comprehensive analysis, follow the links to our dedicated guides.
Hedge funds are pooled investment vehicles that use flexible strategies - including short selling, leverage, and derivatives - to pursue returns that are less dependent on the direction of public markets. Unlike traditional long-only funds, hedge fund managers have broad discretion to invest across asset classes and adjust exposure dynamically.
Explore our guideStrategies range from long/short equity and global macro to event-driven and relative value approaches. Hedge funds typically offer monthly or quarterly liquidity, subject to lock-up periods and gate provisions.
Private equity involves investing directly in companies that are not listed on public stock exchanges. Investors commit capital to funds that acquire, develop, and eventually sell businesses - generating returns through operational improvements, strategic repositioning, and financial engineering over multi-year holding periods.
Explore our guideThe asset class encompasses several sub-strategies, from leveraged buyouts of mature companies to venture capital investments in early-stage businesses. Fund lifecycles typically span ten to twelve years.
Private credit involves non-bank lenders providing loans directly to companies outside the traditional banking system. As post-crisis regulation has restricted bank lending to certain borrower segments, private credit funds have stepped in to fill the gap, earning an illiquidity premium above comparable public debt.
Explore our guideStrategies range from senior secured direct lending to mezzanine, distressed debt, and venture lending. The asset class has grown from approximately $500 billion in 2015 to over $1.7 trillion in 2024.
Structured products are pre-packaged investments that combine a bond with a derivative to create a customised payoff linked to an underlying asset - such as an equity index, a commodity, or an interest rate. They can be engineered to offer capital protection, enhanced yield, or leveraged exposure.
Explore our guideThe range extends from conservative capital-protected notes to more complex autocallable structures and yield enhancement products. Structured products carry issuer credit risk in addition to market risk.
These categories are typically accessed through specialised funds or direct investment structures, each with its own liquidity characteristics and risk profile.
Every wealth journey starts with a conversation. Our advisers are ready to understand your objectives, assess your circumstances, and build a strategy tailored to your goals.
Begin Your Journey With UsThe primary rationale for including alternative investments in a portfolio is not to replace traditional assets, but to complement them. Institutional allocators now typically target 15-30% of their total portfolio in alternative strategies, up from single digits two decades ago.
| Investor Type | Typical Allocation to Alternatives | Primary Objectives |
|---|---|---|
| Sovereign wealth funds | 20-40% | Long-term growth, diversification, inflation protection |
| Pension funds | 15-25% | Return enhancement, liability matching, diversification |
| Endowments and foundations | 30-60% | Maximum long-term return (Yale model) |
| Family offices | 20-50% | Wealth preservation, tax efficiency, bespoke access |
| High-net-worth individuals | 10-25% | Diversification, access to institutional strategies |
Building an alternative investment allocation requires careful attention to several factors:
Alternative investments offer compelling benefits, but they also carry risks that differ fundamentally from traditional assets. Investors should carefully evaluate the following:
Investors considering alternative investments should be aware that this guide provides general information only and does not constitute financial advice. Individual circumstances, risk tolerance, and investment objectives should always be discussed with a qualified adviser.
Hexagone Group — General Disclaimer
Alternative investment regulation has evolved significantly since the 2008 financial crisis. Key frameworks include:
The complexity and diversity of the alternative investment landscape make professional guidance particularly valuable. Key areas where advisory support matters:
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Alternative investment funds are professionally managed pools of capital that invest in strategies beyond traditional stocks and bonds - including private equity, hedge funds, private credit, and structured products. They typically target higher returns, diversification, or income, in exchange for reduced liquidity.
Access depends on the strategy and vehicle. Options include direct fund commitments, feeder funds, semi-liquid vehicles, and fund of funds platforms. Minimum investments vary from $50,000 to several million. To explore options suited to your profile, begin your journey with us.
Allocations vary by investor type and objectives. Institutional investors typically target 15-30%, while family offices may allocate 20-50%. The right level depends on liquidity needs, time horizon, and risk tolerance - there is no universal answer.
Increasingly, yes. The emergence of semi-liquid vehicles, lower minimums, and regulated access structures (such as ELTIF 2.0 in Europe) has broadened participation beyond institutional investors. However, alternatives require careful evaluation. Contact us for more information about how alternative strategies may fit within your wealth plan.
Key risks include illiquidity (capital locked for extended periods), performance dispersion across managers, valuation uncertainty for private assets, leverage exposure, and higher fee structures. Thorough due diligence on strategy, manager, and terms is essential before committing capital.
