Alternative Investments: A Strategic Addition

For decades, high-net-worth investors have relied on a core portfolio of stocks, bonds, and cash to build and preserve wealth. These traditional investments remain essential, but as market conditions evolve, many investors are seeking ways to enhance diversification, reduce volatility, and unlock new growth opportunities.

This isn’t about replacing your existing investment strategy—it’s about strengthening it.

Alternative investments—such as private equity, private credit, real estate, and commodities—are gaining popularity among high-net-worth investors looking to complement their portfolios with assets that could offer long-term appreciation, passive income, and inflation protection.

If your investment strategy is built for long-term financial security, it may be time to explore how alternative assets can work alongside traditional investments to help create a more resilient and well-balanced portfolio.

Why Traditional Portfolios May Benefit from Diversification

The 60/40 portfolio model—a long-standing investment approach allocating 60% to stocks and 40% to bonds—has historically been considered a balanced strategy. However, in today’s complex market environment, relying solely on public markets may no longer offer the same level of protection.

Challenges That Investors Face Today:

• Stock Market Volatility: Market swings are becoming more frequent and unpredictable, driven by inflation, interest rate hikes, and global uncertainty.
• Bond Market Pressures: Rising interest rates reduce the value of bonds, making fixed-income strategies less effective for long-term wealth preservation.
• Inflation Risk: Cash and low-yield investments lose purchasing power over time, reducing their ability to generate real returns.

This doesn’t mean abandoning stocks and bonds—they remain a foundation of wealth creation. However, integrating alternative investments into your strategy may provide additional stability and growth potential.

The Role of Alternative Investments in Portfolio Diversification

Alternative investments operate outside of traditional stock and bond markets, offering high-net-worth investors exposure to private market opportunities, tangible assets, and inflation-resistant investments.

Here’s how these asset classes can complement your portfolio:

1. Private Equity – Unlocking High-Growth Opportunities

Private equity provides access to privately held businesses before they go public, allowing investors to capitalize on early-stage growth and long-term value creation.

Why Private Equity Can Enhance a Portfolio:

• Historically, private equity has delivered higher long-term returns than public markets.
• Private companies tend to have less exposure to daily market fluctuations, reducing volatility.
• Investors can target high-growth sectors such as technology, healthcare, and clean energy.

Private equity requires a long-term investment horizon, making it a valuable addition for investors looking to build wealth over time while complementing public market holdings.

2. Private Credit – A Fixed-Income Alternative with Attractive Yields

Private credit has become an appealing alternative to bonds, offering potentially higher yields while reducing exposure to public market fluctuations.

Why Private Credit Works as a Portfolio Enhancer:

• Higher income potential than traditional bonds and savings vehicles.
• Lower correlation to stock market volatility, reducing overall risk exposure.
• Provides an opportunity to act as a direct lender to businesses, often secured by real assets.

With banks tightening lending standards, private credit is filling the gap—offering investors an opportunity for stable, income-generating investments that work alongside traditional portfolios.

3. Commodities – A Natural Hedge Against Inflation

Commodities, including gold, oil, and agricultural products, offer protection against inflation, currency devaluation, and economic uncertainty.

How Commodities Can Complement Your Portfolio:

• Gold has historically been a strong hedge against inflation and stock market downturns.
• Energy and raw materials remain essential to global economies, driving long-term demand.
• Commodities have low correlation to stocks and bonds, making them a useful tool for reducing overall portfolio risk.

Adding a strategic commodities allocation can help provide protection during inflationary periods while balancing risk in a traditional portfolio.

4. Real Estate – A Tangible Asset for Stability and Passive Income

Real estate remains one of the most widely used alternative investments for high-net-worth investors, possibly offering long-term value, passive income, and asset protection.

How Real Estate Strengthens a Portfolio:

• Private real estate funds and commercial properties can generate steady cash flow, even in volatile markets.
• Medical office buildings, multi-family housing, and industrial real estate have historically performed well during economic downturns.
• Tax benefits such as depreciation deductions, 1031 exchanges, and opportunity zone incentives can enhance after-tax returns.

Additionally, real estate investments can be structured within LLCs or trusts, adding an extra layer of legal protection and estate planning flexibility.

For long-term stability and consistent returns, real estate remains a valuable complement to a diversified portfolio.

Is It Time to Add Alternative Investments to Your Strategy?

Your current investment strategy has helped you build and preserve wealth—but could it be optimized even further?

Alternative investments aren’t meant to replace your existing portfolio. Instead, they can work alongside your stocks, bonds, and cash reserves to:

• Diversify your portfolio with asset classes that respond differently to market cycles.
• Enhance risk-adjusted returns by helping to reduce reliance on public markets.
• Provide alternative income streams through private credit, real estate, and commodities.
• Potentially offer long-term appreciation in asset classes with historically strong performance.

If you’re looking for ways to enhance your wealth strategy while maintaining your current investment approach, exploring alternative investments as a complement to your portfolio may be the next step.

Let’s discuss how this approach can work for you.

Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. They are not tax efficient, have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques. The value and performance of alternative investments can be volatile. There is often no secondary market for an investor’s interest in alternative investments and none is expected to develop.

Private equity investments typically require a long-term commitment, often locking up capital for several years, and they tend to be less liquid than public equities.

Private credit borrowers tend to be riskier than their traded counterparts, such as high-yield bond and leveraged-loan issuers. Borrowers in private credit are also relatively vulnerable to the creditworthiness of the borrower, and interest rates, as loans have floating rates.

Investments in commodities may have greater volatility than investments in traditional securities and may involve substantial risk of loss.

There are material risks associated with investing in DST properties and real estate securities such as liquidity, vacancies, market conditions, interest rate, etc. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional. DST 1031 properties are only available to accredited investors and entities only.

Past performance is not a guarantee of future results. Diversification does not guarantee profit or protect against loss.