You’ve probably heard the term ‘alternative investments’, but if you aren’t sure what it means – or how it relates to your investment portfolio – read on.
As alternatives attract more interest – and generate more demand – many investors have been asking: What exactly are alternative investments? And why is everyone suddenly talking about them?
Alternatives are a category of investments that include real estate, commodities, community bonds, commercial mortgages, private equity and even cryptocurrencies. Essentially, they’re anything that falls outside of traditional public equities and public debt. Historically, these types of investments have been largely inaccessible to the average investor. But that’s now changing, as new structures and products are making certain options more broadly available.
“There’s a growing acceptance of investments that are not publicly traded companies, and their popularity with investors has increased in recent years.”
The upswing in interest – fuelled by factors such as volatility in public markets, increased investor education and evolving public policy in the U.S. – has propelled the growth of the global alternatives industry, which is predicted to reach $29.2 trillion in assets under management by 2029, up from $16.8 trillion at the end of 2023. This increase is reshaping both conventional investment strategies and the impact investing landscape.
“Alternatives as an asset class have been around for quite some time, but until recently they were considered esoteric and risky – and primarily for institutional investors,” says Genus Portfolio Manager Darryl Brown. “Now there’s a growing acceptance of investments that are not publicly traded companies, and their popularity with investors has increased in recent years.”
Alternatives bring opportunities for increased portfolio diversification and impact – but they do require additional consideration. If you’re thinking of adding them to your portfolio, here’s what you need to know.
Alternatives can complement your investment portfolio (but they shouldn’t replace everything)
Alternatives are a great way to diversify your investment portfolio, but they should only form a modest percentage of your overall portfolio allocations. “You should treat alternatives as a complement as opposed to a wholesale replacement for other investments,” Brown says, adding that alternatives are typically allocated to 5-15% of a portfolio’s holdings.
This is because alternatives can be riskier investments in isolation. Consider the case of private equity in a startup impact business. On its own, it could be considered a high-risk investment. But as part of a larger portfolio, its risk is offset by its low and sometimes negative correlation to other investments among the overall holdings. “When you assess alternatives as part of a broader portfolio, the expectation is that they will contribute positively to financial performance and reduce the overall risk of your portfolio,” Brown says.
Because they often have a lower correlation with public markets, alternatives may behave differently during market swings. However, it’s important to know that they carry their own risks and are not immune to losses.
Alternatives can create local – and social – impact
Many of our clients are drawn to alternative investments because of their potential for creating impact – particularly impact within their local communities. “It’s definitely become part of the ‘Buy Canada’ movement,” says James Dick, Genus’ Senior Sustainable Investment Associate. “Many of our Impact Investment Council (IIC) clients (a group of accredited investors) hold impact investments that are Canada-based. Some are community-oriented, while others are larger-scale growth opportunities in Canadian companies.”
“It’s definitely become part of the ‘Buy Canada’ movement.”
A common form of alternative impact investments are community bond funds, which can be used by charities, non-profits and co-operatives to finance socially and environmentally impactful projects. “A lot of investors want to see their capital be more catalytic for change,” Dick says. “And as investors learn more about this, the demand continues to grow.”
Beyond community bonds, investors are increasingly looking at private equity and private debt in areas like climate tech, regenerative agriculture, affordable housing and social ventures. These sectors often need capital that isn’t always available through traditional financial intermediaries. Social enterprises, too, often benefit from flexible capital that enables them to scale solutions for housing, healthcare or education. For impact investors, alternatives like these provide a direct way to fuel innovation while still seeking financial returns.
Education is critical to success with alternatives
While alternatives are more accessible than ever, they can be more complex than traditional investments. Without proper understanding, investors may misunderstand risks or liquidity constraints. “Investor education is a key component to successfully holding alternatives in your portfolio,” Brown says. “If there isn’t a dialogue between the wealth advisor and the client, it may not make sense to hold these investments.”
Wealth advisors play a crucial role in guiding clients through nuances such as understanding investing timelines (many alternatives require longer holding periods and aren’t as liquid as stocks), clarifying risk/return profiles (alternatives can offer higher returns, but with varying levels of risk depending on the asset) and evaluating alignment with values.
As the alternatives space evolves, investors can expect wider access to investment solutions that make it easier to participate. A recent survey shows nine out of 10 financial advisors in the U.S. (92%) currently incorporate alternative investments into client portfolios, and 91% plan to increase allocations over the next two years.
And as they gain traction, alternatives are proving to be more than a trend – they’re becoming a strategic way for investors to diversify their portfolios and increase their risk-adjusted returns while catalyzing meaningful change.
If you’re interested in exploring alternatives as part of your investment strategy, speak with a Genus advisor about our values-based investment services.
This document was prepared for general information purposes only and should not be considered a substitute for specific professional advice. In particular, its contents are not Intended to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. As such, this document should not be relied upon for investment or other financial decisions and no such decisions should be taken on the basis of its contents without seeking specific advice. Genus has relied upon the accuracy and completeness of certain data and information obtained from third parties. It should also be noted that past performance is no guarantee of future results.
References:
Chen, J. (2025, May 20). What are alternative investments? definition and examples. Investopedia. https://www.investopedia.com/terms/a/alternative_investment.asp
- RFI Global. (2024, October 8). The investment revolution: NewGen investors and the lure of alternative investments. https://rfi.global/the-investment-revolution-newgen-investors-and-the-lure-of-alternative-investments/
- The White House. (2025, August 7). Fact Sheet: President Donald J. Trump Democratizes Access to Alternative Assets for 401(k) Investors. https://www.whitehouse.gov/fact-sheets/2025/08/fact-sheet-president-donald-j-trump-democratizes-access-to-alternative-assets-for-401k-investors/
- Preqin. (n.d.). Preqin | Alternative Assets Data, Solutions and Insights. https://www.preqin.com/jp/about/press-release/global-alternatives-markets-on-course-to-exceed-usd30tn-by-2030-preqin-forecasts
The State of Alternative Investments in Wealth Management 2025. (n.d.). https://www.mercer.com/en-us/insights/investments/financial-intermediaries/the-state-of-alternative-investments-in-wealth-management-2025/?utm_source=chatgpt.com
