Our Capabilities: Alternative Investments

Alternative investments are defined as those that fall outside the traditional equity and fixed-income asset classes. They can come in the form of private equity, private debt, private real estate, other real assets, and hedge funds. Investors often turn to alternatives to seek diversification, alternative sources of income, total return, and access to unique investment opportunities.

• Diversification: Alternative investments are often less correlated to these assets and therefore can be a complement to one’s existing portfolio. They can span multiple asset classes and investment strategies.
• Returns: Alternatives often exhibit unique risk/return characteristics compared with conventional investments. For example, private equity may offer higher potential returns through illiquidity premiums, while hedge funds may provide strategies designed to generate alpha in both rising and falling markets.
• Alternate Source of Income: Private debt may involve lending to private companies or individuals, typically at higher interest rates than traditional bonds. In return, investors can earn differentiated income through regular interest payments, often at a higher yield, reflecting the higher risk of lending to less liquid or more speculative borrowers. Private real estate can provide income in the form of rental yields, which may stem from investments in apartment complexes, industrial warehouses, retail shopping centers, data centers, or office buildings.
• Unique Access: This may include assets that are harder to access, such as infrastructure, natural resources, and early-stage private companies.

Alternatives are not traded on a public market or exchange, and it is important to know the risk elements associated with these investments:

• Limited Regulation: Alternatives are typically subject to limited regulation versus public market investments.
• Illiquidity: Investments and the underlying assets are not publicly traded and may lack a secondary market. Certain investments may require capital to be locked up until a potential liquidity event occurs.
• Transparency: Alternatives generally offer a lower level of transparency compared with traditional investments. The reduced transparency is primarily due to the unique and often less regulated nature of these assets. However, the level of transparency varies across different types of alternative investments.

Contact Us

If you have questions or would like more information, please contact your William Blair Wealth Advisor or PWM@williamblair.com.