Typically, alternative investments have no correlation to conventional investments. This can make them difficult to value. They are also illiquid in comparison to traditional assets. For instance, it may be more of a challenge to sell a piece of art than 500 shares of Amazon. It’s also difficult to actually value these assets since there are many considerations when determining each individual asset’s value.
Usually, institutional investors or accredited investors with a high net worth hold alternative investments because of their complexities, level of risk and deficiency of regulation. Recently, these investments have grown in popularity because institutional investors, which include pension and endowment funds, are increasing their investments in alternative options. They are doing so due to the potential long-term perks of this asset class.
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