The New Face of Diversification: Why Alternative Investments Matter More Than Ever in 2025
Diversification with Alternative Investments
At Cornerstone Wealth, we believe that smart diversification is more than just spreading risk across traditional asset classes. In 2025, a growing number of investors are turning to alternative investments to work towards managing volatility, hedge against inflation, and access opportunities beyond the public markets.
From private equity and real estate to infrastructure and private credit, these investment vehicles have emerged as a critical component of portfolio construction for high-net-worth individuals, institutions, and increasingly, accredited retail investors.
"Diversification is evolving. We're seeing heightened interest in private markets and other alternatives that may offer differentiated return streams in a shifting economic environment."
— Cliff Hodge, Chief Investment Officer, Cornerstone Wealth
These differentiated return streams refer to performance patterns that don’t always follow the broader market, offering investors the ability to smooth volatility and pursue more consistent long-term results. This has become especially appealing during periods of macroeconomic uncertainty.
What Are Alternative Investments?
Alternative investments are non-traditional assets that can behave differently than stocks and bonds. This includes:
Private Equity: Long-term investments in private companies.
Private Credit: Lending to private companies outside traditional banking.
Real Assets: Such as real estate, infrastructure, or commodities.
Hedge Funds: Pooled investments with a broad range of strategies.
These assets are often less liquid, but can provide potential benefits like low correlation to public markets, inflation protection, and access to specialized market trends.
For a broader definition, read an overview on Alternative Investments from the CFA Institute.
It’s important to note that these investments typically require a longer time horizon and higher risk tolerance. For investors with a strategic outlook and the ability to remain patient, alternatives can offer enhanced diversification beyond traditional asset classes.
Why Are Alternatives More Relevant Than Ever in 2025?
1. Persistent Market Volatility
The S&P 500 has seen wide swings in recent quarters, and macroeconomic uncertainty has left many investors searching for stability.
BlackRock’s 2025 Investment Outlook highlights that over 60% of institutional investors plan to increase exposure to private markets to diversify returns.
2. Inflation Resilience
Inflationary forces have persisted longer than many anticipated. Real assets such as infrastructure and commodities can act as hedges, preserving purchasing power over time.
3. Increased Accessibility
Innovative fund structures are breaking down barriers to entry. Interval funds and evergreen private market vehicles are enabling individual investors to access previously exclusive strategies.
4. Enhanced Portfolio Diversification
Adding alternatives to a traditional 60/40 portfolio may reduce overall risk and enhance potential returns, particularly in non-correlated sectors.
Frequently Asked Questions About Alternative Investments
Are alternative investments risky?
Yes, many alternatives involve higher risk due to illiquidity, complexity, and less regulatory oversight. However, with proper due diligence and advisor guidance, these risks can be managed appropriately.
Can individual investors access alternative investments?
Access has grown significantly. New structures like interval funds and private credit vehicles are making alternatives available to accredited and even qualified retail investors.
Do alternative investments belong in retirement portfolios?
They can—especially for long-term investors. However, allocation should align with your retirement timeline, liquidity needs, and overall risk profile.
Fast Facts on Alternatives
Global alternative assets under management (AUM) are projected to reach $24.5 trillion by 2027 (Preqin).
Private credit is one of the fastest-growing categories, expected to exceed $2.7 trillion AUM by 2026 (Apollo Global Management).
Real estate demand remains strong, particularly in logistics, multifamily housing, and senior living sectors.
Considerations Before You Allocate
At Cornerstone Wealth, we take a disciplined, educational approach. Alternative investments are not one-size-fits-all. Investors should consider:
Liquidity needs (many alternatives are long-term and illiquid).
Accreditation requirements for certain private offerings.
Tax implications and fund structure.
Alignment with personal goals and risk tolerance.
Our role is to provide clarity and support as you evaluate whether alternative investments are an appropriate fit. Schedule a conversation with a member of our team to explore your options.
As fiduciaries, we’re committed to offering objective advice to help clients navigate these decisions with confidence.
Final Thoughts: Diversification with Alternative Investments
The landscape of wealth management is changing—and alternatives are at the center of that evolution. As access widens and investors demand more strategic portfolio construction, Cornerstone Wealth remains committed to offering transparent insights and thoughtful guidance.
This is for informational purposes only and does not serve as personal advice. Please speak to a qualified representative regarding your unique circumstances. Links within this blog are not associated to Cornerstone Wealth and are subject to change. Hyperlinks will take you to a third-party website whose content Cornerstone Wealth does not control. Investment advisory services offered through Cornerstone Wealth Group, LLC dba Cornerstone Wealth, an SEC registered investment adviser.
