Alternative Investments
Investment Types
In Short
Alternative investments are assets that fall outside of traditional categories like stocks and bonds, including private equity, real estate, and hedge funds. Investors use them to diversify portfolios, hedge against volatility, and seek potentially higher returns.
detailed Definition
‘Alternative investments’ is an umbrella term used to describe investment options that fall outside of traditional public market instruments such as stocks, bonds, and cash.
These assets are typically categorised as either intangible or tangible:
• Intangible alternative assets include private equity, venture capital, hedge funds, funds of funds, and increasingly, cryptocurrencies.
• Tangible alternative assets include real estate, commodities, natural resources, and collectibles such as art, wine, or rare coins.
While motivations vary, investors typically allocate to alternatives for three core reasons: portfolio diversification, potential for outsized returns, and hedging against public market volatility. Because many alternative assets exhibit low correlation with traditional markets, they can enhance risk-adjusted returns over time.
Portfolio allocation to alternatives generally ranges from 5% to 25%, depending on the investor’s risk profile, liquidity needs, and investment objectives. A commonly cited principle, sometimes referred to as the 5% rule, suggests allocating at least 5% of a portfolio to alternatives to achieve meaningful diversification benefits.
Important Information
CapGain does not make investment recommendations and no communication, through this website or otherwise should be construed as a recommendation of any security. Alternative investments in private placements are highly illiquid, speculative, and involve a high degree of risk. Past performance is not indicative of future results. Investors may not get back their money originally invested and those who cannot afford to lose their entire investment should not invest. Prior to investing, carefully consider the respective fund documentation for details about potential risks, charges, and expenses. The value of an investment may go down as well as up. An investment in a private equity ("PE") fund or investment vehicle is not the same as a deposit with a banking institution. Investors receive illiquid and/or restricted membership interests that may be subject to holding period requirements and/or liquidity concerns. Investors who cannot hold an investment for the long term (at least 10 years) should not invest. In the most sensible investment strategy for PE investing, PE should only be part of your overall investment portfolio. The PE portion of your portfolio may include a balanced portfolio of different PE funds.
The CapGain platform may be accessed by certain international investors globally, including ‘Professional Investors’ (as defined by the DFSA) in the UAE, on a cross-border basis after appropriate checks and confirmation of their status. CapGain’s products are not suitable for retail investors in the UAE.