Alternative Paths

When Investors Go Unconventional

Alternative investments are everything that isn't a public stock or bond. Office towers, oil barrels, wine cellars, a stake in a startup nobody's heard of yet — if it trades outside the usual markets, it counts.

Pension funds buy toll roads to collect steady traffic revenue. Hedge fund manager Ken Griffin paid $44.6 million for a stegosaurus skeleton named Apex in 2024, while a mint-condition 1999 first-edition Pokémon card has sold for $420,000.

Alternatives can hedge against inflation or rise in value when traditional markets struggle. The catch? They're often harder to value and trickier to sell than the stocks and bonds in your brokerage account.

What Moves These Markets

A recession that tanks the S&P 500 stock index doesn't necessarily hit Iowa farmland or a toll road in the same way. That's the point.

• Gold tends to climb when investors get nervous about inflation or war.
• Farmland cares about rainfall and soybean demand, not so much about what the central bank is about to do next.
• A toll road's returns depend on how many cars show up, rush hour after rush hour.

Big institutions lean on this. The Yale Endowment (a university investment fund) became famous for allocating large portions of its portfolio to private markets, helping popularize the idea that investors don't need to rely solely on stocks and bonds.

Trade-Off Behind Private Access

Alternatives can hand investors a seat at the table years before a company goes public. Amazon and Google both had private backers who bought in long before an IPO banker ever rang a bell.

That access comes at a price: liquidity. Sell an S&P 500 index fund on a Tuesday and the cash is yours by Thursday. Selling an office building or a stake in a private firm can take months, sometimes with no buyer in sight.

Retail investors can often access these types of assets only through specialized funds or other pooled investment vehicles rather than buying them directly. Some assets may be off-limits altogether, unless you're very wealthy.