Alternative investments have been creating quite a buzz in the financial market as investors contend with the effects of a global pandemic, geopolitical risks, and the resulting impact on the performance of traditional assets such as stocks and bonds.

This roller coaster experience in traditional asset prices caused by the aforementioned factors is expected to become the new normal but has negative implications for long-term financial goals.

As a result, the search for investments in assets in non-traditional spaces, which have exhibited relatively low correlation to stocks and bonds, has intensified.

When additional benefits such as the potential returns, steady income stream, and inflation hedge are considered, alternative investments have become a staple for investors in this day and age. Historically reserved for institutional and high net worth investors, alternatives are now considered a core portfolio holding.

Alternative investments may include hard assets such as commodities, currencies, infrastructure projects, vacant land and developed real estate/real estate investment trusts (REITs).

They may also include a group of assets professionally managed in a non-traditional format. These investments can deliver returns from different drivers and in different patterns than traditional stocks and bonds. As a result, there are significant diversification benefits when included in a standard portfolio.

Stronger diversification offers the benefits of potentially generating attractive returns, reducing volatility in a portfolio for a smoother and less-stressful investment experience, while preserving capital over a longer-term horizon.

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