Alternative Investments

Alternative investments are non-traditional investment assets that typically provide diversification beyond public stocks and bonds.

Common Types:

Private Equity:

- Buyout funds and growth capital

- Venture capital investments

- Distressed and special situations

- Secondary market investments

Real Estate:

- Direct property investments

- Real estate investment trusts (REITs)

- Real estate funds and partnerships

- Development and value-add strategies

Hedge Funds:

- Long/short equity strategies

- Event-driven investments

- Macro and currency strategies

- Quantitative and systematic approaches

Private Credit:

- Direct lending to companies

- Mezzanine financing

- Distressed debt investments

- Specialty finance strategies

Characteristics:

- Lower liquidity than public markets

- Longer investment time horizons

- Higher minimum investments

- Complex fee structures

- Limited transparency

- Potential for higher returns

Benefits for Family Offices:

- Diversification from public markets

- Access to unique opportunities

- Potential for higher risk-adjusted returns

- Inflation protection

- Control over investment timing

Challenges:

- Due diligence requirements

- Liquidity constraints

- Higher fees and expenses

- Operational complexity

- Regulatory considerations

Access Methods:

- Direct investments

- Fund investments

- Co-investments

- Separate account arrangements

Due Diligence:

- Manager evaluation and selection

- Investment strategy analysis

- Risk assessment and monitoring

- Operational due diligence

- Legal and regulatory review

Alternative investments typically comprise 20-60% of family office portfolios, providing diversification and return enhancement opportunities.