Alternative investments

Not one group but a collection of very different things

The only thing they all have in common is that they are not listed stocks or ordinary fixed income securities. Three features tend to link them: they are often illiquid, their value is updated infrequently (there is no continuous market price), and their sources of return are different. You need to understand each one as its own kind of asset.

Why they are interesting: diversification

The main reason is diversification: many alternative investments move at a different pace from stocks and bonds. When one falls, the other doesn't necessarily fall too. That smooths the portfolio's journey and can reduce its overall volatility. This is a real benefit when it is used correctly.

Beware the illusion: smoothed returns

Many alternative investments look more stable on paper than stocks. That doesn't mean lower risk. It means the value isn't updated as often, and a smooth line can be misleading. The benefit is only realized if you can live with poor liquidity for the whole investment period, so you should demand a liquidity premium, in other words a higher expected return, for these investments.

Who they are for and how to get access

In Finland, some of the best funds (private equity, private credit) often require professional investor status (for example a portfolio of more than €500,000 and experience). Routes for private investors include ELTIF structures, listed asset management companies and ETFs. Illiquid investments are not suitable for money you may need soon.

This content is for information purposes only and should not be construed as investment advice or a recommendation. Investing always involves the risk of losing capital. The value of financial instruments and investments can go up or down, and past performance is no guarantee of future returns.