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Turmoil in the public markets is coming at the same time access to private markets has increased.

By Christopher C. Williams

There’ s been a whirlwind of contradictory political and economic dictates from the new administration in Washington, D. C., especially when it comes to inflation-inducing tariffs. The turmoil has sent publicly traded stocks on a roller-coaster ride, which is causing advisors and investors to look to alternatives, a $ 22 trillion asset class, as a possible hedge against high inflation, interest rates and possible recession.

Alternatives— whether that means private credit, private equity, real estate, digital assets or vintage cars— offer far more than just a diversification play or an inflation hedge, say the asset class’ s proponents. In many cases, alts also offer higher riskadjusted returns than offerings in the public markets.

The key is picking the right managers and asset classes, and here alternatives strategists see many attractive and compelling opportunities in various sectors, especially private credit, real estate and infrastructure. The range of potential returns is wide, and each asset class comes with its own return and risk profile. Nevertheless, industry observers generally expect high-single to low-double-digit returns over the long term for many investment strategies, notably involving private equity and some areas of public debt.

From 2005 to 2023, Fidelity Investments noted that returns for private equity, for example, returned 15.2 %, outpacing traditional assets and all other alternative categories. U. S. large capitalization public companies gained 9.7 % over that period. However, returns among private equity have slowed noticeably in recent years and many big family offices are shrinking their allocation to the asset class.

Given the increasing opportunities for exposure to alternatives, the portfolio options“ will continue to grow and will only help to benefit the wealth and retail markets,” says Alex Catterick, senior managing director of high-net-worth and private markets at Manulife John Hancock Investments in Boston.

Other alternative bulls are even more direct: Investors who are underweight should beef up their allocation to alternatives and private markets, adding alpha and balance to the typical 60 / 40 construction. According to data from Fidelity, 86 % of institutional investors invest in alternative strategies, and the average institutional investor has 24 % in alternative investments. On the other hand, only 26 % of advisors are using such strategies, and the average allocation they make to alternatives

48 | FINANCIAL ADVISOR MAGAZINE | APRIL 2025 WWW. FA-MAG. COM