Money & Finance › Asset types & alternatives
Alternative investments: private funds, art and collectibles
· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
Alternatives are investments outside public stocks, bonds and cash: private equity, venture capital, hedge funds, private credit, art and collectibles.
See it on the Money & Finance map →How it works
Most are private funds: investors commit money for 7 to 12 years, usually as limited partners, and get it back as deals are sold. Fees are high, classically '2 and 20': 2% of assets a year plus 20% of profits. Many are open only to accredited investors. Yale's endowment, under David Swensen from 1985, made alternatives its core. Values are reported quarterly, often by appraisal. Art, wine and collectibles pay no income and cost a lot to buy, store and sell.
Why it matters
They promise returns and diversification beyond public markets, and are now being opened to individuals; an August 2025 executive order pushed to allow them in 401(k) plans.
Think of it like
Like a value-add real estate fund: capital locked up for years, a sponsor's promote on profits, and quarterly appraisals instead of daily prices.
Facts, rules and data
Fund filings, endowment reports from Yale and Harvard, and research on fund cash flows by Cambridge Associates, Preqin and academic economists.
Debates and risks
Whether private funds beat public markets after fees, or mainly smooth reported prices (critics call it 'volatility laundering'), is hotly debated.
Inside this (4)
Connections (2)
▸Alternative investments: private funds, art and collectibles add illiquid options to Asset classes: the menu of investmentsFact, law or data
The connection
Alternatives extend the menu beyond public stocks, bonds and cash with private equity, venture capital, hedge funds, private credit, infrastructure and collectibles. Investors give up the ability to sell quickly, often for a decade, in hope of an 'illiquidity premium' and returns that move differently from public markets.
When and why
Yale under David Swensen from 1985 led the shift; pensions and sovereign wealth funds followed, and the 2020s push targets individuals and 401(k)s.
How we know
Endowment and pension reports show large allocations; Cambridge Associates and Preqin publish fund return data.
Debates and risks
Whether an illiquidity premium survives fees, or smoothed appraisals simply understate the true risk, is debated.
▸Alternative investments: private funds, art and collectibles increasingly include Private credit fundsFact, law or data
The connection
Alternatives are assets outside public stocks, bonds and cash. Private credit became one of the fastest-growing, as pensions and endowments sought yields near 10%. Managers now market it to wealthy individuals through nontraded BDCs and interval funds, and a 2025 executive order encouraged offering alternatives in 401(k) plans.
When and why
Took off in the 2010s; the August 2025 executive order directed the Labor Department to revisit its 401(k) guidance on alternatives.
How we know
Preqin and PitchBook fund data; SEC filings by BDCs and interval funds; the White House order itself.
Debates and risks
Whether individuals are paid enough for limited withdrawals, high fees and manager-set valuations is debated, as is how these funds would handle a wave of redemptions.