Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Key takeaways
-
01
Alternative investing
Alternative investments can be private assets such as private equity, private credit, infrastructure and private real estate, often referred to as private markets. Or they can be hedge funds – a high risk investment that uses complex strategies like short selling (betting against stocks), to maximise potential returns.
-
02
Benefits of Alternatives
Alternative asset classes offer potential for higher returns and diversification from the stocks and bonds that dominate most investors’ portfolios. However, it’s important to consider the trade-offs: higher risk, lower liquidity (hard to sell quickly for cash), and longer investment commitment.
-
03
Choosing a portfolio
An investment portfolio that works well for one person may not be the best fit for another. As with any investment decision, it's important to first understand what you're trying to achieve and then identify the best portfolio to get there.
Risk: Diversification and asset allocation may not fully protect you from market risk.
Why BlackRock for Alternatives?
What are private markets?
1 Capital IQ, BlackRock as of 31 December 2023. Represents the number of global companies with annual revenues greater than $100 million. 88% are private companies and 12% are public companies.
Private markets are large,1 more complex, and less liquid than public stocks and bonds, as they are not publicly traded and easily sold for cash without losing value. Private markets may offer differentiated opportunities and potential additional sources of risk and return for an overall portfolio.
Risk: Diversification and asset allocation may not fully protect you from market risk.
What are the benefits associated with alternatives?
It’s important to understand both the risks and benefits that come with alternatives investing. Here’s a few which investors care about right now:
Alternatives overview
-
Alternative investments are assets that don’t fall into traditional categories such as stocks, bonds, or cash (highly liquid assets). They provide a counterweight for portfolio diversification – and some real assets, like real estate and infrastructure, may effectively hedge against inflation.
-
There are private assets like private equity, private credit, infrastructure, and real estate. And liquid alternatives - hedge funds and listed funds investing in underlying private markets assets.
-
Potential diversification, as these investments often have risks that don’t move in the same direction as regular stocks or bonds you can buy publicly.
Inflation mitigation, alternatives investing involves assets that hold their value even when prices of goods and services go up, which can be a typical feature of real assets.
Enhanced potential returns, as alternatives can also offer potential opportunities that aren’t available in public markets.
-
As with any type of investing, private markets can offer financial rewards but they also come with their unique set of risks. These can include liquidity risk, market risk, and capital risk to name a few.
