Time to go beyond stocks: why you should consider alternative investments

To build strong, diversified portfolios that will withstand any buffeting from today’s ever-changing financial landscape, more investors are looking beyond traditional asset classes such as stocks and bonds. At Elkstone, we've seen growing interest in alternative investments, and specifically in private market investments and for good reason.

But what exactly are alternative investments? Let’s look at why the smart money is seeking out alternative options.

Understanding alternative investments

Alternative investments are financial assets that don’t belong to the conventional investment categories of stocks (also known as shares or equities), bonds and cash. They can include:

Property: this broad category includes commercial properties, residential developments and real estate investment trusts (REITs).

Private equity: this covers ways to invest in private companies not listed on public exchanges.

Hedge funds: these actively managed investment funds use diverse strategies to generate returns for limited groups of investors.

Commodities: this category covers physical goods like raw materials for manufacturing, gold, oil or agricultural products.

Venture capital: this is funding for early-stage, high-potential growth startups – it can be high risk, but can offer high rewards.

Infrastructure: this category involves physical assets such as roads, bridges and energy projects, along with utilities and telecommunications infrastructure.

Each of these categories offers distinct characteristics and potential benefits, meaning they can offer invaluable potential for diversification (and therefore risk management) in a well-rounded investment strategy.

What are the benefits of alternative investments?

1. Enhance your portfolio diversification

While the values of traditional assets such as stocks and bonds often move in tandem during periods of market volatility, many alternative investments have low correlation with those more mainstream assets. This means alternatives can provide stability when other parts of your portfolio are underperforming.

2. Avail of potential for higher returns

Alternative investments, can offer potential for higher returns compared with the primary asset classes.

As tends to be the case in investing, that potential for higher returns comes with increased risk. Nonetheless, investors seeking to enhance their portfolio's overall performance can be willing to assume this risk.

3. Hedge against inflation

Alternative investments, such as property and commodities, can be effective hedges against inflation. As the cost of living rises, these assets often appreciate, helping your portfolio to keep pace with inflation over time.

4. Gain access to restricted opportunities

Traditional investment mechanisms don’t give investors access to restricted markets and opportunities. Venture capital allows you to invest in innovative startups before they go public, for example, potentially enabling you to take advantage of significant early-stage growth.

5. Generate steady income

Property developments, infrastructure projects and other investments can provide steady income streams. This can be a particularly useful upside in low-interest-rate environments when traditional fixed-income investments may offer minimal yields.

Know the risks of alternative investments

While alternatives offer compelling benefits, it's crucial to understand the risks associated with them.

Low liquidity: Many alternative investments are illiquid, meaning they can't be sold or converted to cash quickly or easily.

Complexity: Alternatives can involve more complex strategies and structures than traditional assets. This is why professional advice is non-negotiable when it comes to investing.

Higher fees: Alternative can often come with higher fees compared with traditional investment options, reflecting the more hand-on investment management involved.

Lower transparency: Given they’re privately traded and not subject to the same market strictures, some alternatives may offer less transparency than publicly traded securities.

Regulatory risk: Bear in mind that changes in regulations can significantly affect the value and operations of some alternative investments.

Why choose Elkstone for alternative investments?

At Elkstone, we bring a wealth of experience and expertise to the world of alternative investments:

Deep market knowledge: Our team has a deep understanding of both local Irish markets and global investment landscapes.

Tailored approach: Enabling access to private markets, co-investing alongside institutional investors.

Access to exclusive opportunities: Our network and reputation give us access to high-quality alternative investment opportunities not available to the public.

Holistic portfolio management: We consider how alternative investments fit into your overall investment strategy, ensuring a well-balanced portfolio.

Are alternatives right for you?

Alternative investments offer a powerful tool for portfolio enhancement, providing diversification, potential for higher returns and access to unique opportunities.

They also come with their own set of risks and complexities, however. It’s important to conduct thorough research and due diligence before committing to any investment.

Elkstone is Ireland’s leading alternative investments firm specialising in private markets.

Want to dive deeper into the world of alternative investments? Contact our investment team today to get started on your investment journey.

Warning: Past performance is not a reliable guide to future performance.

Warning: Benefits may be affected by changes in currency exchange rates.

Warning: The value of your investment may go down as well as up.

Warning: If you invest in these funds you may lose some or all of the money you invest.

Elkstone Private Advisors Limited (trading as Elkstone, Elkstone Wealth, Elkstone Private and Elkstone Ventures) is regulated by the Central Bank of Ireland.

Warning: This is a marketing communication. This document is not a contractually binding document and has been prepared for information purposes only. It is not intended as and does not constitute a personal recommendation. Please do not base any final investment decision on this.