Alternative investments are on the rise. A study by the Journal of Financial Planning found that adoption of alternative investments grew over 98% from 2024 to 2025. Similarly, The Motley Fool reports that ultra high net worth investors now typically allocate 20% of their assets to this category. As a complementary investment option to be used alongside traditional equity and fixed income allocations, alternative investments can be a powerful cornerstone of a modern portfolio.
As Paul Squarcia, founding partner at One Charles Private Wealth explains, alternative investments are well worth considering, but it is equally important that would-be investors understand the unique nature of this asset category.
The Potential Value of Alternative Investments
“The biggest advantage of alternative investments is that they can provide another layer of diversification to your portfolio, well beyond what you can get by investing in a traditional public market alone,” Squarcia explains.
“Many alternative investment opportunities have lower correlation to the public markets, which can help reduce your overall risk and open up the potential for higher returns. Private market opportunities with niche asset classes can be especially productive for long-term investment strategies.”
Of the many alternative investment opportunities Squarcia has examined, some of the most common options include private equity investments in businesses, private credit in non-public lending markets and real assets (such as real estate and infrastructure). A growing number of investors have also begun utilizing specialized sector strategies, including investments in technology and AI-driven infrastructure.
An alternative investment ultimately includes anything that isn’t stocks, bonds or cash. Even items like art or high-end watches can be considered alternative investments (for example, the Motley Fool notes that luxury watches saw a 125% increase in value over the last decade). Regardless of the specific asset involved, these investments are integrated as part of a diverse investment portfolio, rather than viewed as a standalone investment opportunity.
The increased interest in alternative investments comes at a time when a growing number of investors are coming to the conclusion that a traditional 60/40 investment framework is no longer sufficient. High inflation, low interest rates on fixed income investments and other global events contributing to economic uncertainty are causing many to reassess whether they should continue to rely as heavily on public markets that are often heavily influenced by these and other issues.
Access to Alternative Investments Is Key
While alternative investments may seem like an exciting opportunity for many investors, Squarcia notes that these investments typically aren’t available for the general public. “Alternative investment opportunities are usually only available through private offerings and institutional relationships,” he explains.
“The organizations looking for investors want to do so through their established relationships to ensure they get qualified investors who meet their minimum commitment requirements, which are often significant. As a result, gaining access to a specific alternative investment strategy isn’t the same as buying stocks. It depends on the private market’s eligibility requirements, regulatory considerations and manager capacity. It’s something we take very seriously when advising investors on these opportunities.”
Because of these requirements, most high-value alternative investment opportunities require that investors already have a high net worth and significant capital that they can invest. It also often requires advisors who have connections with the private placement networks that make these opportunities available in the first place.
What to Consider Before Investing
Aside from using trusted platforms for institutional access, Squarcia also notes that due diligence is an absolute must for any investor considering an alternative investment.
“Alternative investments do have many benefits, but they also have unique risks that should be considered. Many types of investments have limited liquidity or a much longer-term investment horizon. Alternative investments typically rely more heavily on manager execution than a publicly traded investments. They also tend to have reduced transparency, as well as more complex structures and fee arrangements. So while they can be a powerful solution for accredited investors, they aren’t for everyone.”
Because of this, Squarcia advises an individual evaluation of each alternative investment opportunity. “We need to perform due diligence of the private market opportunity itself, such as the manager’s track record, the capital structure and fee alignment and other underlying risk factors that could affect the long-term sustainability of the investment. But we also need to determine if it’s a good fit for the individual investor’s portfolio in terms of their financial goals, liquidity profile, time horizon and so on. There’s no one size fits all approach. Each opportunity needs that individual evaluation.”
An alternative investment opportunity that could be the perfect fit for one investor may be entirely unsuitable for another. As with traditional investments, the right selection ultimately depends on the individual’s risk tolerance and investing goals.
Adding Alternative Investments to the Modern Portfolio
With their diversification benefits, potential for higher returns and protection against inflation, alternative investments are becoming an increasingly attractive option for investors, especially as geo-economic concerns will undoubtedly only become more prevalent in an increasingly connected world.
As a result, properly guided alternative investment strategies are no longer just an optional way to diversify a portfolio. They are becoming a cornerstone for high net-worth individuals who are serious about their investment strategy.
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