Categorised as financial assets that fall outside the traditional categories of stocks, bonds, and cash, alternative investments offer a way to diversify a portfolio and hedge against market volatility. As they often have a low correlation with traditional assets, they allow investors to spread risk and increase the potential for long term growth. They can also provide access to unique and innovative opportunities, such as investing in emerging technologies, sustainable energy, or social impact projects. As the investment landscape continues to evolve, alternative investments have become an essential component of a well-rounded portfolio. We take a look at four alternative investments to consider.  

1. Market-neutral hedge funds

The full impact of Trump’s policy agenda remains unclear, as key measures are still evolving. However, his administration’s focus on tariffs and government downsizing has triggered concerns about inflation and potential slowdown. 

Alternatives can help navigate such markets. For example, market-neutral, multi-strategy hedge funds are structured to perform across macro conditions and can exploit macro volatility. This is because market-neutral, multi-strategy hedge funds are designed to perform well in any market condition by balancing long and short positions. This approach helps them generate returns from price differences and market movements, rather than relying on the overall market going up or down. By doing so, they can help reduce risk and increase potential returns, even in volatile markets.

2. Private markets

Against the backdrop of uncertainty, growing, profitable companies become even more attractive to investors. Private markets are investments that are traded outside of public exchanges and include investments such as private equity, private debt, and venture capital. They offer a key opportunity set for accessing specific types of companies, such as domestic, service-oriented businesses.

Yet, identifying winners is complex. Performance dispersion is likely to widen among fund managers in private markets, with only those who bring scale, value-add capabilities, and a proven track record being able to access best-performing opportunities. Given this complexity, a selective approach across alternative managers and asset classes remains essential to reduce portfolio correlation and enhance resilience. Private equity can also benefit from market dislocations, enabling investors to acquire high-quality companies at compelling valuations through distressed sales and consolidation opportunities.

3. Private infrastructure

Private infrastructure presents a unique opportunity for investors by offering a stable source of long-term returns, backed by tangible assets such as roads, bridges, and utilities, which are less correlated with traditional markets. This allows investors to benefit from predictable cash flows, lower volatility, and diversification, making it an attractive addition to a portfolio.

Private infrastructure combines the defensive attributes of inflation-linked contracts and essential services with long-term growth exposure to megatrend themes like digitalisation and decarbonisation. Many investors are also not yet allocated to this asset class, creating an attractive opportunity to gain exposure. Follow this link to listen to Julius Baer’s recent Beyond Markets podcast episode on the topic.

4. Sponsor-backed direct lending

Sponsor-backed direct lending is a strategy that involves providing senior secured loans to growing, profitable companies in non-cyclical, asset light businesses owned by a private equity sponsor. The strategy offers consistent income and attractive yields and is often among the top performers across the credit spectrum, delivering equity-like returns.

Find out more about the current investment environment by downloading our Market Outlook Mid-Year 2025 brochure.