Alternative Asset Management – Future-Proof Your Portfolio

Old Faithful: The 60/40 Portfolio

Since the early 1980s, the 60/40 portfolio of public equities and bonds was the gold standard for achieving long-term wealth. Grounded in the principles of modern portfolio theory, the simple blended portfolio is designed to deliver attractive risk-adjusted returns with less annualised volatility. Today, we see this trusty portfolio framework facing challenges from major marketplace shifts.

In an ever-changing financial landscape, traditional investments like stocks and bonds may no longer be enough to safeguard your wealth. Diversifying into alternative assets can provide resilience and growth opportunities, even during economic uncertainty.

Here’s how alternative asset management can help you future-proof your portfolio and ensure long-term stability.

What Are Alternative Assets?

Alternative assets refer to investments outside the traditional categories of stocks, bonds, and cash. These include tangible assets like real estate and commodities, as well as intangible ones like private equity, hedge funds, venture capital, and cryptocurrencies.

The appeal of alternative investments lies in their ability to provide diversification, reduce overall portfolio risk, and offer unique opportunities for higher returns.

Global Trends in Alternative Investments

The alternative investment market has grown significantly, with assets under management projected to exceed $23 trillion by 2026, up from $13.3 trillion in 2018. This growth is driven by increasing interest from institutional investors seeking diversification and higher returns.

In Australia, demand for alternative assets is also on the rise. The Australian Investment Council reports that private equity investments have delivered annualised returns of 16.2% over the past decade, outperforming traditional equity benchmarks.

Types of Alternative Assets

Private Equity and Venture Capital

Overview: These investments involve funding private companies at various stages of growth, from start-ups to established businesses.

Returns: Private equity has outperformed public equity markets over the long term, with median annual returns exceeding 14% globally.

Real Estate

Overview: Commercial and residential real estate remains a cornerstone of alternative investments. With the rise of REITs (Real Estate Investment Trusts), even small investors can access this market.

Trends: Australian real estate markets show mixed growth, with Perth leading in price increases while Sydney and Melbourne experience declines.

Commodities and Precious Metals

Overview: Gold, silver, and other commodities act as inflation hedges, preserving wealth during economic uncertainty.

Current Insights: Gold prices remain steady, offering stability as global inflation pressures ease.

Digital Assets

Overview: Cryptocurrencies and blockchain-based projects have matured, becoming viable alternatives for high-risk, high-reward portfolios.

Trends: Bitcoin’s institutional adoption and the rise of decentralised finance (DeFi) are reshaping the digital asset landscape.

Why Consider Alternative Assets?

Diversification and Risk Management Alternative assets often have a low correlation with traditional markets, meaning they can perform independently of stock market volatility. By incorporating alternatives into your portfolio, you reduce reliance on market-driven assets, creating a more balanced and resilient investment strategy.
Enhanced Returns Alternative investments, such as private equity or venture capital, can offer higher potential returns than traditional assets. While they come with higher risks, they also provide opportunities to capitalise on innovative industries and emerging markets.
Inflation Protection Assets like real estate and commodities often retain value or even appreciate during periods of high inflation, providing a hedge against the erosion of purchasing power.
Access to Unique Opportunities
Many alternative investments are not publicly traded, allowing access to exclusive markets and unique opportunities. Whether it’s a stake in a promising start-up or a share in a renewable energy project, these investments offer diversification that traditional markets can’t.

Strategies for Managing Alternative Assets

Managing alternative investments requires a tailored approach, as they often come with unique challenges, such as liquidity constraints and regulatory complexities. Here are key strategies for success:

Conduct Thorough Due Diligence
Alternative assets can be more complex and less transparent than traditional investments. Working with financial advisors to evaluate risks, returns, and market conditions is essential before committing capital.
Start Small: Begin with a small allocation—5-10% of your portfolio—before gradually increasing exposure as you gain confidence.
Maintain Diversification
While alternatives can improve portfolio balance, over-concentration in a single asset class or market can increase risk. Spread investments across different types of alternatives to mitigate potential losses.
Understand Liquidity Needs
Many alternative assets, like private equity or real estate, are illiquid, meaning they cannot be easily sold or converted to cash. Ensure your portfolio includes a mix of liquid assets to cover immediate needs while your alternative investments grow.
Regular Portfolio Reviews
Economic conditions and asset performance can change over time. Regularly reviewing your portfolio with a financial advisor ensures your strategy remains aligned with your financial goals and market trends.

Alternative Investment Trends to Watch in 2025

Green Investing: Renewable energy projects and ESG-focused alternatives are seeing increased demand due to climate initiatives.

Tokenization of Assets: Blockchain technology is enabling fractional ownership of assets like real estate, making alternatives more accessible.

Rise of Private Credit: Direct lending to businesses is becoming a popular alternative to traditional debt markets.

Explore trends in sustainable investing with Forbes.

Is Alternative Asset Management Right for You?

While alternative assets provide compelling benefits, they aren’t suitable for every investor. Factors like risk tolerance, financial goals, and investment timelines should guide your decisions.

At Poole Advisory, we specialise in helping clients navigate the complexities of alternative investments. Our personalised strategies ensure your portfolio is resilient, diversified, and aligned with your unique financial goals, let’s have a chat and make a plan that suits you.

Compliance Disclaimer:

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns.

Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917