Look beyond traditional fixed income and equity markets to gain wider exposure that can add diversification to your portfolio, potentially hedge against market volatility, and help you reach your investment goals.
Alternative investments generally refer to investments that serve as alternatives to traditional asset classes like stocks, bonds, or cash. They could include investments such as private equity, private credit, hedge funds, and private real estate. Alternative investments are often referred to as a non-correlated asset class since their performance does not typically move with stock or bond markets.
Alternative investments give investors exposure to investments and strategies not typically found in traditional fixed income or equity markets.
Lower volatility versus open markets
While highly speculative, alternative investments can be less susceptible to market swings than traditional fixed income and equity investment options.
Potentially give you higher returns
Although alternative investments could involve substantial risks over traditional fixed income and equity investments, they can have the potential for higher returns over the long-term than traditional investments.
Alternative investments are not suitable for all investors. They may only be offered to investors who meet specific suitability and best interest requirements, including minimum assets and net-worth standards.
Questions about alternative investments? We've got answers.
Alternative investments are non-traditional assets that go beyond stocks, bonds, and cash. They can offer diversification and potentially higher returns but often come with higher risks and less liquidity. While Northwestern Mutual might not offer all of these, here are some common examples:
Real Estate:
Properties like apartment buildings, logistics facilities, or real estate investment trusts (REITs).
Private Equity/Credit:
Investments in private companies not listed on public stock exchanges.
Hedge Funds
Pooled investment vehicles that use various strategies to generate returns, often with a focus on risk management.
Venture Capital:
Funding for startups and early-stage companies.
Ask one of our financial advisors if alternative investments are right for you. Get matched with one today.
Typically, no. Mutual funds and ETFs (Exchange-Traded Funds) are mainstream investment that offer a diversified portfolio of stocks, bonds, or other securities. Alternative investments, on the other hand, include assets such as hedge funds, private equity, and real estate. These alternatives often have less liquidity, higher risk, and different regulatory requirements compared to traditional investments. While mutual funds and ETFs can give exposure to alternative assets, they themselves are categorized as traditional investments due to their structure, regulation, and market accessibility.
Want to know more about the different types of investments that might be right for you? Check out this article.
The potential to generate higher returns usually comes with higher risks and alternative investments are no different. They may not be suitable for all investors and involve special risks such as:
Illiquidity:
Alternative investments typically require longer investment commitment periods and there's generally no secondary trading market. Investors are subject to lengthy lock-up periods and generally cannot access their money during this time. Some alternative investment funds have quarterly redemption periods and require investors to submit redemption requests 60-days or more in advance. Redemptions could also be subject to limitations of liquidity known as gating as stated in the fund policy. Other alternative investments, like private equity, typically have no redemption mechanism and investors must be willing and capable to commit capital for the life of the investment, which can be more than 10 years.
Costs:
Generally speaking, the fees and expenses associated with alternative investments are often higher than those of traditional investments.
Leverage:
Alternative investments generally employ borrowing strategies (leveraging) to help enhance the chance of higher returns, which can also increase potential losses and higher risk for investors.
Limited transparency:
Due to their product structure, alternative investments afford investors limited visibility into the underlying investments and their valuations.
Tax reporting:
Investing in alternative investments can often impact federal, state, and local income tax returns for investors.
Performance reporting:
Alternative investment performance typically lags the performance reporting of traditional fixed income or equity investments like mutual funds or ETFs.
Speculative nature:
Alternative investments are highly speculative and there's no guarantee that investing in them will be successful, produce positive returns, or that the investments will achieve their intended investment goals.
Investing in alternative assets has historically been limited to financial institutions or high-net-worth individuals who can understand the risks associated with such investments. This is because most alternative investments are private offerings that are not traded on public markets. To learn more about how alternative investments can fit into your portfolio, talk with a financial advisor.
Yes. Northwestern Mutual offers a highly curated platform of alternative investment funds. With an advisory account, our financial advisors can create a strategy that aligns with your risk tolerance and investment objectives, across both traditional and alternative investments. They'll have access to investment expertise based on our time-tested philosophy, disciplined process, and proprietary capital market assumptions. With our brokerage account, you'll make the decisions to buy, hold or sell, we'll help you figure out your options and recommend the right investments to help take you where you want to go. Keep in mind, alternative investments are not suitable for all investors. They may only be offered to investors who meet specific suitability and best interest requirements, including minimum assets and net-worth standards.talk with a financial advisor.
Our financial advisors can help with alternative investments
Alternative investments are different than traditional assets. They're complex and generally carry greater risk, have higher investment minimums, higher fees and expenses, and are illiquid. Because of these unique attributes, it's important for you to work with an experienced financial advisor who understands alternative investments and who can evaluate how a particular alternative investment and its features fit your individual needs and objectives.
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The Northwestern Mutual difference
Top 10 ranked investment service
We're one of the top U.S. Independent Investment Broker-Dealers.1
5.1M+ clients at Northwestern Mutual
The number of people we're proud to call clients, and who put their trust in us.2
168+ years strong through depressions, downturns, and pandemics
The number of years we’ve been there for our clients—through depressions, downturns, and pandemics.
Our financial advisors can help determine if you're qualified and whether alternative investments are the right fit for your investment strategies and goals.
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