How Alternative Investments Could Complement Your Portfolio in 2026

Amid the market volatility of the past year, many high-net-worth (HNW) and ultra-high-net-worth (UHNW) investors have turned to alternative investments as they look for diverse investment opportunities beyond the public stock and bond markets. A recent Preqin report shows that global alternative assets are expected to hit more than $32 trillion in assets under management by 2030, partly due to growth from wealthy investors and institutional investors allocating more to private markets.

But why invest in alternative investments in the first place, and what role can these investments play in your 2026 investment portfolio? Alternative strategies, such as real estate, infrastructure, private credit and private equity, are helping many investors diversify their portfolios, reduce volatility and enhance returns. These alternative assets often have a lower correlation with traditional investments, like publicly traded stocks and bonds, and some can offer additional upside, which is especially appealing amid periods of market uncertainty.

What Are Alternative Investments?

Alternative investments are financial assets that don’t fall into the traditional investment categories of stocks, bonds or cash equivalents; they’re also called private market investments. Examples include private equity, private credit, real estate, commodities, infrastructure assets and other real assets, such as timberland and certain collectibles. They aren’t often publicly traded, tend to be more illiquid and aren’t usually as heavily regulated as traditional investments.

So why consider them for your portfolio? Adding alternative investments to your investment strategy can introduce new sources of diversification, help reduce overall volatility and potentially enhance long-term returns by accessing different drivers of performance than traditional markets provide.

Common Types of Alternatives

Below are some of the most common types of alternative investments and how they work.

Private equity

Private equity (PE) involves PE firms raising equity capital from institutional investors and high-net-worth individuals to acquire private companies. From there, the firms manage the companies for around 10 years, aiming to ultimately sell them for a profit. Traditionally, the three main branches of PE are:

• Venture capital – Targets young, innovative companies that are often not yet profitable but may offer high growth potential
• Growth capital – Targets more mature companies — often small- and medium-sized enterprises (SMEs) that have found their market and are profitable but need additional capital to expand
• Buyout – Targets well-established mature companies with steady cash flows, often using leverage to acquire a controlling stake

By investing, you position yourself to tap into the profits the PE firm generates and potentially beat returns from the public equity market over the long term. A long-term study of private equity allocations by large institutions found that private equity delivered an annualized net return of roughly 11% over more than two decades, outpacing comparable public equity portfolios, though past performance isn’t a guarantee of future results. On the downside, PE investments are highly illiquid and come with higher fees, higher risk and limited transparency compared with many traditional investments.

Private credit

Private credit involves non-bank organizations extending custom loans to borrowers — often private middle-market companies — as an alternative to traditional bank lending. The asset class has grown significantly since the global financial crisis, as banks have reduced some lending activities, and investors have sought additional income-oriented strategies in private credit.

Potential benefits for investors include steady cash flows, meaningful portfolio diversification, built-in downside protection through collateral and covenants, and the advantage of floating interest rates that adjust with the market. For many investors, private credit can act as a differentiated fixed income stream in their portfolio to complement publicly traded bonds.

Real estate

Real estate continues to play a central role in alternative portfolios, and it’s one of the most familiar real assets for many investors. You can opt for direct ownership of properties — residential, commercial real estate or mixed-use — and grow your wealth through rental income and price appreciation. Alternatively, you can invest in real estate funds that allow you to gain exposure to real estate investments without actually managing the properties.

The four main categories of real estate investing include:

• Core investments – High-quality, well-located, low-maintenance properties in major markets that provide steady, predictable cash flows
• Core-plus investments – Quality properties in good locations that need minor improvements and have moderate vacancy rates
• Value-add investments – Properties that require sizable expenses, such as operational enhancements or remodeling, and have high rates of vacancy
• Opportunistic investments – Development properties in high-growth areas that need major updates but have the potential to offer high returns

You can opt for the category (or categories) that best suit your budget, desired involvement level and risk tolerance. But, overall, investing in real estate can offer several potential benefits, including portfolio diversification, the generation of passive income, significant long-term appreciation and an effective hedge against inflation.

Infrastructure

Infrastructure encompasses investments in essential assets across energy, transportation, utilities, digital networks and other core services that support modern society. These investments can bring reliable long-term cash flow, inflation protection, long-term appreciation and portfolio diversification. And they’re no secret. Private infrastructure assets under management have grown significantly over the past decade, reflecting increased demand from investors seeking real assets with stable, contractual cash flow, increasing from $500 billion in 2016 to $1.5 trillion by 2024, according to McKinsey. Green energy and digital infrastructure are major growth drivers here as economies transition to cleaner energy and greater data connectivity.

Other alternatives

Beyond the leading alternative investment assets, there are a few other honorable mentions. You may want to consider commodities like metals and energy products for inflation protection, certain cryptocurrencies and structured products for exposure to technological innovations, and collectibles or art as niche investment opportunities. For example, some investors allocate to art, rare wine, antique cars or other collectibles as part of a broader real assets strategy focused on diversification and long-term appreciation. However, these assets carry higher risk profiles, create valuation challenges and require specialized knowledge.

How Alternatives Differ From Traditional Assets

Alternative investments are primarily defined by what they’re not — the traditional trio of stocks, bonds and cash equivalents. Beyond that, they tend to differ from traditional assets in the following ways:

• Illiquidity – While traditional assets trade daily on public markets, many alternatives lock up capital for longer periods. Private equity and real estate funds, for example, often require multi-year commitments.
• Correlation – Alternative assets tend to move somewhat independently of public markets, which can reduce portfolio volatility and improve risk-adjusted returns when combined with traditional asset classes.
• Access requirements – Alternatives are more likely to limit access to accredited or qualified investors and institutional investors, while traditional investments are widely accessible to individual investors.
• Fees – Alternative investments often have more complex and expensive fee structures, involving an annual management fee and a performance-based incentive fee (e.g., the “2 and 20” model), which means higher fees that must be weighed against potential excess returns.
• Reporting – Alternative investments typically report periodically, making real-time transparency more limited than with public investments.

When combined, traditional and alternative investments can create a more resilient portfolio that aligns with your comprehensive wealth management plan. Traditional investments offer liquidity, transparency and steady long-term growth potential, while alternatives can add diversification, dampen volatility and introduce return drivers that may outperform the public market over longer cycles.

Benefits of Including Alternative Investments in Your Portfolio

Now, let’s dig deeper into the main benefits of alternative investments.

Reduced portfolio volatility

Alternative investments can help reduce overall portfolio volatility, because they often move differently from public markets. When your stocks and bonds drop, alternatives like private equity, private credit, real estate and infrastructure can follow different performance patterns, helping to steady your portfolio’s overall performance.

Enhanced risk-adjusted returns

Alternative investments can also improve your risk-adjusted returns by adding new sources of return that aren’t tied solely to traditional market behavior. By spreading your risk across different types of assets and performance drivers, you increase your potential to earn more relative to the amount of volatility you’re taking on, especially when allocations are thoughtfully sized and carefully monitored.

Consistent income

Many alternative investments can help you build steady, reliable income streams. For example, infrastructure assets often offer predictable cash flow through long-term contracts, private credit delivers competitive yields across different interest rate environments, and real estate provides rental income along with potential appreciation.

Tax-efficiency opportunities

Alternative investments can open the door to meaningful tax planning opportunities. For example, certain real estate investments offer depreciation benefits, while private equity and venture funds can provide favorable long-term capital gains treatment on successful exits. By incorporating tax-advantaged structures into your allocation, you and your advisor can strategize to keep more of your after-tax returns over time.

Market cycle protection

Alternative assets can also offer protection during shifting economic environments due to behaving differently from traditional stocks and bonds. Commodities and infrastructure, for example, have historically maintained value during inflationary periods, while real assets may appreciate when public markets come under pressure. Thoughtfully integrating alternatives can help your portfolio better withstand different phases of the economic and market cycle.

Do alternative investment strategies sound like the right fit for your portfolio? The wealth management professionals at Creative Planning can help you evaluate whether alternatives align with your financial goals and risk tolerance. Contact us today to discuss how a diversified approach might enhance your long-term investment outcomes.

How Much of Your Portfolio Should Be in Alternatives?

Deciding on which alternative assets to invest in, and how much to allocate to each, starts with getting clear on your goals, time horizon and risk tolerance. Each asset class comes with a unique return profile, liquidity requirement and risk level, so you’ll need to find the options that best align with what you’re trying to achieve.

From there, the amount you invest depends on factors like how much volatility you’re comfortable with and how long you can tie up your capital. A wealth manager or financial advisor can help you compare different strategies, run scenario analyses and conduct alternative investment due diligence to determine the allocations that best fit into your broader financial plan.

How to Add Alternative Investments to Your Strategy

Once you’re ready to get started or learn more, you can contact a Creative Planning wealth manager to determine how alternative investments best fit into your overall portfolio. We’ll walk you through the risks and benefits of the various assets so that you can make informed decisions.

Plus, you’ll have a professional at your disposal to perform due diligence and explain how specialized alternative investment strategies may benefit you. Once you figure out the right allocations for your situation and invest, your advisor will continue to monitor your portfolio’s performance and provide guidance over time.

Final Thoughts on Alternative Investment Portfolios

At Creative Planning, we help high-net-worth and ultra-high-net-worth clients build diversified, resilient portfolios that pursue growth while actively managing risk. And as we move into 2026, alternative investments are playing an increasingly important role.

We’re highly selective about the firms we partner with, choosing only those with deep expertise and a proven track record serving clients like ours. Thanks to our size and negotiating power, Creative Planning is also uniquely positioned to offer access to top-tier investments at competitive, institutionally negotiated pricing across a range of alternative asset classes.

The result is a custom, strategically built investment approach designed to help you navigate changing markets with confidence and clarity.

Frequently Asked Questions About Alternative Investments

Are alternative investments riskier than traditional investments?

Alternative investments are generally riskier than their traditional counterparts for a few reasons. They often involve less transparency, lighter regulation and more complex structures. Many strategies also target higher returns, which come with higher illiquidity and longer investment horizons. That said, not all alternatives carry the same level of risk, and when properly sized and diversified, they can help reduce the overall risk of your portfolio by adding uncorrelated sources of return.

Can alternative investments provide income as well as growth?

Yes, some alternative investments are designed to provide both income and long-term appreciation. For example, real estate can generate rental income while its underlying property value appreciates over time, and infrastructure assets often produce steady, contracted cash flow and may also appreciate as demand for essential services increases. Private credit strategies can similarly offer recurring interest income while diversifying beyond traditional bond markets.

How do alternative investments perform in market downturns?

Alternative investments generally have low correlation to public markets, which can help reduce portfolio volatility during downturns. For example, real assets and certain commodities may hold their value or even increase in value during periods of high inflation or market stress, though performance can vary widely by strategy and time frame. For a more detailed view of how specific alternatives might behave in your portfolio, you can consult a Creative Planning wealth manager.