What role do alternative investments play in a portfolio?
- Diversification and reduction of total risk. For a portfolio dominated by listed stocks and bonds, introducing a moderate weight of alternative investment funds (real estate, private equity, infrastructure, private credit, commodities) can reduce volatility and improve the return/risk ratio due to lower correlations with traditional markets.
- Then, capturing the illiquidity premium. Investors willing to lock capital for longer terms are "paid" through potentially higher returns compared to fully liquid investments. Alternative investment funds are an institutionalized way of accessing this premium.
- Alignment with specific objectives. Whether we are talking about income: real estate funds or lending can offer periodic cash flows (rents, interests), growth: private equity, venture capital or funds focused on aggressive growth, or inflation protection: certain alternative investments (real estate, infrastructure, commodities) can have returns positively correlated with inflation, contributing to protecting purchasing power.
- Strategic role in wealth planning. At the international level, consortia such as CAIA and CFA Institute emphasize that alternatives are becoming a standard component of diversified portfolios for long-term investors, not just an "exotic add-on". In Europe, the AIFMD framework provides a common framework for their integration into wealth management.
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