Why alternatives?

The global alternative investment market is growing rapidly. Although estimates vary, most studies point to an expanding market. An October 2022 report from Preqin, a research and analytics company, expects the global market for alternative investments to grow to $18.3 trillion in five years, well above its $9.3 trillion size in 2021.  

Alternative assets typically include any asset other than ‘traditional’ equity, bond and currency investments. One type covers financial instruments that take alternative approaches to investing such as hedge funds, private equity and debt, or distressed funds. Another category involves ‘real’ or physical assets ranging from commodities, precious metals, infrastructure or real estate. Cryptocurrencies and non-fungible tokens are among the more recent markets that have made inroads with wider audiences. 

Another category falls under the term ‘collectibles’ and includes items such as art, antiques, watches, classics cars and, of course, fine wine.

The current period of uncertainty stemming from the war in Ukraine, rising inflation and cost-of-living concerns is prompting more investors to seek diversification to manage risk.  Before this, many investors looked to alternatives as a source of growth amid the extended period of low interest rates and high equity valuations that pervaded in the wake of the Global Financial Crisis and more recent COVID outbreak.

This greater demand could add to the performance potential of many alternatives, especially the so-called collectibles. These real assets generally have fixed supply levels and growing demand exerts upward price pressure.

Potential benefits of alternative assets