The Case for Alternatives

Published: June 27, 2025

Sophisticated investors are increasingly incorporating alternative investments into their portfolios to help potentially manage risk and enhance returns. Understanding the role alternative investments can play in a diversified portfolio is an important part of informed wealth planning.

What are Alternative Investments?
Alternative investments are financial assets that fall outside the traditional asset classes of publicly traded stocks, bonds, and cash. These diverse asset classes include private equity (PE) and debt, hedge funds, real estate and venture capital. Alternatives are often characterized by distinct risk-return profiles and investment horizons.

What benefits can Alternative Investments deliver to your portfolio?
A thoughtful allocation to alternatives can offer important benefits including:

Enhanced Diversification – Alternative investments often exhibit low or negative correlation with traditional asset classes, offering the potential to reduce portfolio volatility and risk.

Potential for Higher Returns – Many alternative investments offer the potential for higher long-term returns by capitalizing on opportunities and inefficiencies not available in public markets.

Access to Unique Opportunities – Alternative investments provide access to opportunities not typically available through traditional public markets that may offer superior risk/return profiles to traditional investments such as investments in early-stage companies, infrastructure projects, or niche markets.

Access to an Expanded Opportunity Set – The number of private companies significantly exceeds that of public ones – according to Wells Fargo economists, there are now approximately five times the number of PE-backed firms in the US than there are public companies – offering a deeper and more diverse pool of investment options.

In short, alternatives can help enhance overall performance while building greater portfolio resilience.

Risk Considerations
Alternatives are speculative in nature and may not be suitable for all investors, generally only being available to accredited investors, qualified clients and/or qualified purchasers. Investments in alternative strategies involve significant risks, including loss of capital, illiquidity, and leverage. Alternative investments are typically illiquid, as compared to traditional investments, and redemptions from such investments often involve holdbacks and other restrictions on the timing of the redemption. In addition, alternatives are not registered with the Securities Act of 1933.

To learn more about how alternative investments might support your wealth management goals, contact us at 212.492.7000. If you are not yet working with Klingenstein Fields Advisors, we welcome the opportunity to discuss how we can help you and your family achieve your long-term wealth planning goals.

Important Disclosures

This material is provided for informational or educational purposes only and should not be construed as investment, accounting, tax or legal advice. Always consult a financial, tax and/or legal professional regarding your specific situation. This communication is not intended as a recommendation or as investment advice of any kind. It is not provided in a fiduciary capacity and may not be relied upon for or in connection with the making of investment decisions. Nothing herein constitutes or should be construed as an offering of advisory services or an offer to sell or a solicitation to buy any securities or a recommendation to invest in any specific investment strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future returns. The views expressed herein are as of a particular point in time and are subject to change without notice. The information and opinions presented herein are general in nature and have been obtained from, or are based on, sources believed by Klingenstein Fields Advisors (“KF Advisors’) to be reliable, but KF Advisors makes no representation as to their accuracy or completeness. Although the information provided is carefully reviewed, KF Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided. KF Advisors represents two investment advisers registered with the Securities and Exchange Commission: Klingenstein, Fields & Co., L.P. ® and KF Group, LP. If you are a KF Advisors client, please remember that it remains your responsibility to advise KF Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.