Canadian Pension Plans have increased their investments in alternative assets from 10% to 39% since 1990.
Today alternative assets are a larger portion of the Pension Funds’ asset mix than stocks. Similar trend is also observed in the US endowment funds and Pension funds.
Broadly speaking, an alternative asset is any asset that is not in traditional stocks, bonds or cash. There are a variety of different vehicles and instruments to invest in alternative assets classes and they each carry varying degrees of risk.
Some of the major categories of alternative investments are:
2. Real Estate – by far the largest
3. Hedge Funds
4. Private Equity
Alternative investments provide an avenue to boost return and create diversity in the portfolio. In the case of Real Estate, it can also be one of the only vehicles for hedging against inflation.