Is now the right time to invest in alternatives?

Introducing alternatives like hedge funds and private market investments into a portfolio could help to reduce risk and may improve long-term returns.

In today’s evolving financial landscape, alternative investment management is gaining traction among high-net-worth individuals (HNWIs) seeking diversification and opportunities beyond traditional assets like stocks, bonds, and cash. Alternatives offer a unique combination of growth potential, risk mitigation, and portfolio diversification—but they also require careful planning and expertise. At Brown Shipley, we help our clients navigate this complex asset class to unlock its full potential while managing its inherent risks.

What are alternative investments?

Alternative investments refer to assets that fall outside traditional investment categories like equities, fixed income, and cash. Examples include:

  • Private Equity: Private equity invests in private companies (not publicly traded or listed) in exchange for equity or ownership. Public companies can occasionally also be acquired and made private or de-listed.
  • Hedge Funds: Hedge funds are investment funds that invest in traditional assets (equities, bonds, derivatives) and use complex trading, portfolio-construction and risk management techniques to improve performance - such as short selling, leverage, and derivatives
  • Private Real Estate: Private real estate funds make direct investments into existing properties or property developments, covering all sectors and regions.
  • Private Debt: Private debt – often also referred to as private credit – is usually unlisted, not publicly traded debt securities, with a fixed or floating coupon. It is basically a financing source for companies that comes from funds and other investors instead of banks.
  • Private Infrastructure: Infrastructure investment is a broad name for investments (equity/debt, listed/unlisted) into real assets in sectors that provide the public with essential services. 


These investments typically offer exposure to sectors or strategies that are less affected by the movements of public markets, making them an attractive addition to a well-rounded portfolio.   

Benefits of alternative investment management

Alternative investments provide a range of benefits that can complement and enhance your broader financial strategy. Here are some of the key advantages:


Diversification

By introducing assets with low correlation to traditional markets, alternatives can help reduce overall portfolio volatility. For example, infrastructure or real estate may perform well during periods of inflation, offering a hedge against market downturns.


Potential for higher returns

Private equity, private debt, and  other alternative funds often aim for returns that exceed those of traditional investments. While these opportunities may carry higher risk, the potential upside can be significant, especially for investors with a longer time horizon.


Access to unique opportunities

Alternative investment management opens doors to sectors, markets, and strategies typically unavailable to retail investors. This exclusivity can lead to unique growth opportunities tailored to HNWIs.


Inflation protection

Tangible assets like real estate and commodities often retain or increase their value during inflationary periods, providing a buffer against eroding purchasing power.


Alignment with personal values

Certain alternative investments, such as sustainable infrastructure or impact-focused equity investments, allow you to align your portfolio with your ethical or environmental priorities.


Risks and challenges of alternative investments

While the benefits of alternative investments are compelling, they also come with challenges that require careful consideration:


Illiquidity

Many alternatives, such as private equity or real estate, typically involve longer lock-up periods, meaning you may not be able to access your capital quickly.


Complexity

Alternative investments often require advanced expertise and thorough due diligence to evaluate their potential risks and rewards.


Higher fees

Management fees for alternative funds can be significantly higher than those for traditional investments, impacting overall returns.  As a Brown Shipley client, you’ll find we provide transparent value for money. We offer a straightforward and competitive pricing and service structure, with no hidden fees.


Market risk

While alternatives may reduce correlation with public markets, they are not entirely immune to broader economic conditions, which can influence their performance.
At Brown Shipley, we guide you through these complexities with a focus on transparency, helping you weigh the benefits against the risks to make informed decisions.


Harvesting the illiquidity premium

By committing capital to longer-term investment strategies, investors can capture the illiquidity premium—a potential for enhanced returns in exchange for accepting reduced liquidity. This approach rewards patient investors who are willing to lock in their capital, offering the possibility of higher yields compared to more liquid, traditional assets.


Broader opportunity set

The universe of investment opportunities is expanding beyond public markets. Over the past two decades, the number of listed companies has declined by nearly 50%. In the US, 87% of companies with revenues exceeding $100 million remain privately held. As public equity opportunities become more limited, private markets are flourishing, providing access to a broader and more diverse array of investment opportunities. Engaging in alternative investments enables you to tap into this dynamic and growing segment, unlocking potential for growth that is often unavailable through traditional markets.

 

The role of alternatives in portfolio management

Incorporating alternative investments into your portfolio can enhance its resilience and return potential. Here are some key considerations for integrating alternatives:


Diversifying traditional investments

While stocks, bonds, and cash form the foundation of most portfolios, they may not provide sufficient protection against market downturns. Alternatives can add balance and reduce reliance on traditional market performance.


Tailoring to your risk profile

Not all alternatives are suitable for every investor. High-risk strategies like venture capital may appeal to younger investors with time to recover from potential losses, while income-focused real estate may suit those seeking stability.


Enhancing long-term growth

For HNWIs with a focus on legacy planning, alternatives can potentially provide an avenue for long-term capital appreciation and wealth transfer.

THE ROLE OF ALTERNATIVES IN PORTFOLIO MANAGEMENT

Exploring opportunities with Brown Shipley


At Brown Shipley, we specialise in crafting tailored alternative investment strategies that align with your financial goals and risk tolerance. Our approach includes:

  • Personalised advice: We begin with a deep understanding of your aspirations and preferences, ensuring your portfolio reflects your unique priorities.
  • Access to expertise: Leveraging our network and global resources, we identify best-in-class opportunities across alternative funds, private equity, and more.
  • Ongoing management: Alternative investments require active oversight. We monitor performance, market trends, and emerging opportunities to optimise your portfolio.


Explore the full scope of our investment solutions by visiting our investment management page.

Why now might be the right time for alternatives

With market volatility and economic uncertainty dominating headlines, alternative investments offer a compelling case if you are looking to diversify and strengthen your portfolios. Here are a few reasons why now could be an opportune moment:


Shifting market dynamics

Traditional markets face challenges from inflation, interest rate fluctuations, and geopolitical instability. Alternatives can provide exposure to sectors or strategies potentially  less impacted by these pressures.


Growth in private markets

Private markets are experiencing unprecedented growth, driven by innovation in technology, healthcare, and sustainable industries. These sectors present significant opportunities for long-term investors.


Increased accessibility

While alternatives were once the domain of institutional investors, advancements in fund structures and platforms have made them more accessible. At Brown Shipley, we ensure you benefit from this evolution.


Potential for inflation hedging

With inflation concerns persisting , tangible assets like real estate and commodities offer protection against eroding value, making them a valuable addition to your strategy.

GETTING STARTED WITH ALTERNATIVE INVESTMENTS

Getting started with alternative investments


If you’re considering alternative investment management, now is the time to act. Our team of advisors are ready to guide you through the process, offering:

  • Education: Clear explanations of complex asset classes to ensure you’re informed and that alternative investments are suitable for you .
  • Tailored strategies: Solutions designed to align with your financial goals.
  • Active oversight: Ongoing monitoring and management to adapt to changing conditions.


By incorporating alternatives into your portfolio, you can unlock new opportunities while achieving greater resilience in today’s unpredictable market.

Alternative investments involve a high degree of risk and are not suitable for all investors. This document is for information purposes only. It does not constitute investment advice and is not a recommendation for investment.