According to this Fidelity research report, “Institutions have historically held higher average allocations to alternatives than advisors (23% vs. 6%).“.
23% to 6%, that’s a massive difference.
They go on to say some of the reasons why “….given barriers to entry such as manager access, perceived costs, liquidity considerations, and high investment minimums.”
So why do institutions tend to invest more in Alternative Assets like real estate? Here are a few typically agreed reasons to consider:
Low Correlation with Traditional Assets
Alternatives often have a low correlation with standard asset classes like stocks and bonds. This means their performance doesn’t necessarily follow that of more traditional investments, helping to spread and reduce overall risk.
Varied Performance Under Different Market Conditions
Alternative investments can perform differently under various market conditions. For example, certain real estate investments may continue to provide steady rental income even when the stock market is volatile.
Hedge Against Market Volatility
Alternatives can serve as a hedge against volatility in traditional markets. For instance, commodities like gold are often sought after as a safe haven during periods of high market uncertainty.
Inflation Protection
Some alternative investments, like real estate or commodities, can offer protection against inflation as they may increase in value or generate income that keeps pace with rising prices.
At CalTier, we open the door to commercial real estate with a low entry of $500 and follow-on investments of only $50. We built this platform to allow the ‘everyday’ retail investor to diversify their portfolios as some of the institutions do.
