This brilliant article published by Forbes illustrates why alternative assets are the next big thing in the investing industry.
Among the ten reasons listed as crucial points to increase portfolio allocations to alternative investments, are :
HIGHER ABSOLUTE RETURNS
Alternative assets may also earn higher nominal returns than publicly traded stocks and bonds as the multiplier effects of lower valuations, higher growth, and strategic liquidity events compound the effects of capital appreciation.
LOW CORRELATION TO THE STOCK MARKET
Alternatives are typically less correlated with the vicissitudes of the public capital markets with a focus on quarterly performance and the impact of macroeconomic factors.
Public equities and debentures tend to decline in value during periods of inflation because the associated future cash flows are discounted at a higher rate and therefore become less valuable. Alternative assets may be better able to hedge against rising prices because their value is created from financial metrics and nonfinancial, strategic milestones.
SOURCE OF PASSIVE INCOME
Certain alternative assets can generate a reliable income stream over time with a higher yield than dividends or interest payments.
Alternative assets can reduce portfolio volatility through various exposures that each asset type has to market conditions. The greater the exposure, the more protections a portfolio has when compared to limited holdings of traditional investments.
"While alternative investing was primarily only an option for large, institutional investors during the past several decades, today’s new alternative funds and direct investment opportunities are increasingly available for individual investors and family offices. As a result, new capital inflows are fueling exponential growth in the alternatives industry."