Alternative Investments: Real Estate, Commodities, and Crypto Assets

Beyond public equities and core bonds, almost everything else gets labeled alternative: real assets, private credit, hedge funds, private equity, and digital assets. Liquidity is often lower, minimums higher, and documents longer.

Endowment portfolios (e.g. Yale) popularized large “alt” sleeves; headline numbers depend on vintage and benchmark—always read net-of-fee and net-of-borrowing figures.

REITs trade like stocks but must pay out most taxable income; cap rates and NOI matter for direct property. Commodities (gold, oil, ags) often enter portfolios as inflation and macro hedges—WTI went briefly negative in April 2020 as storage filled.

Hedge funds run long/short equity, macro, relative value, and event-driven books; fee structures (2/20 was traditional) compress over time. Private equity and venture capital lock capital for years; VC returns are highly skew—a few names drive the fund.

Bitcoin’s history includes violent drawdowns and multi-year recoveries; sizing small is how many institutions treat it. On-chain perpetuals and spot access via APIs (for example GaiaEx on Hyperliquid) are closer to “liquid alt” than a locked PE fund, but volatility and operational risk remain real.

Correlation is unstable—during acute liquidity stress, “uncorrelated” assets can move together. Gold’s equity correlation varies by decade; BTC’s equity correlation rose in some crisis periods when everything needed cash.

Sharpe ratio compares excess return to volatility; it is not magic when returns are fat-tailed.

Long-run U.S. large-cap equity averages near ~10% annualized before inflation; bonds lower. Crypto’s short history includes extreme dispersion; past spikes do not fund future bills.