Alternative Paths

Why Investors Look Beyond Stocks and Bonds

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 Charizard card has sold for $420,000.

These assets share one trait: they sit outside public markets, giving investors exposure to different sources of return than stocks and bonds.

What Moves These Markets

A recession that tanks the S&P 500 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 the Fed.
• 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 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.

The Trade-Off Behind Private Market 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 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.

Most investors use alternatives to round out a portfolio built mainly on stocks and bonds.