Alternative Asset Classes

Abstract

Alternative assets are not always easy to describe. Before an asset class can be considered “alternative, ” the primary asset classes must be defined, and then what differs is considered “an alternative asset.” The bottom line is that alternative assets fall outside the scope of normal investment portfolios. They provide risk and return characteristics that are distinctly different from traditional portfolios of stocks and bonds. This provides not only excellent portfolio diversification, but also the ability to earn returns that may exceed that of stocks and bonds. However, access to alternative assets is less straightforward than it is to purchase stocks and bonds; therefore, alternative assets are often overlooked because they require more work to invest in than traditional asset classes. Keywords: asset class; hedge fund; private equity; capital assets; store of wealth; economic inputs; strategic asset allocation; tactical asset allocation; asset location; trading strategy; alternative beta