Alternative investments like hedge funds, private equity, real estate, infrastructure, and commodities can provide portfolio diversification benefits. However, they are less liquid, less transparent, have higher fees, and can be difficult for individual investors to access. This article explores key strategies to reach alternative investments.
Invest in funds of funds for access and due diligence
Funds of funds provide individual investors exposure to underlying alternative investment managers. They conduct professional due diligence on managers across strategies. This allows access to top-tier alternative managers that may otherwise be closed to new investors.
Allocate to liquid alternative mutual funds and ETFs
Liquid alts like alternative mutual funds and ETFs provide exposure to alternative strategies in a daily liquid vehicle. This increases accessibility for individual investors significantly. However, the liquidity constraints can reduce managers’ ability to implement true alternative strategies.
Use fractional shares in private market platforms
Fractional share platforms allow investors to buy small dollar amounts of private market assets like venture capital, private equity, real estate funds, and more. This can open up alternatives at lower investment minimums to qualified investors.
Invest in interval funds for exposure to illiquids
Interval funds offer exposure to more illiquid alternative assets while providing periodic liquidity through quarterly or semi-annual repurchase offers. This structure bridges the gap between daily liquid mutual funds and fully illiquid private market vehicles.
Alternative investments can significantly enhance portfolio diversification but have major accessibility constraints. Utilizing fund of funds structures, liquid alternative funds, fractional share platforms, and interval funds allows broader investor access to alternatives and expanded implementation approaches.