An asset class that consists of assets not classified within traditional or classic asset classes. This includes assets such as, or investments in, real estate, commodities (e.g., gold and silver), natural resources, infrastructure and master limited partnerships (MLPs).
More specifically, alternative asset classes involve alternative assets– those that are not equities (stocks, shares of funds, etc.), fixed-income securities, and cash assets (e.g., fixed deposits). Other examples of alternative assets include private equity, currencies, hedge fund shares, exchange traded funds (ETFs), distressed securities, among others.
Alternative assets are often attractive to investors because of their potentially high returns, in addition to their ability to provide for diversification away from traditional assets, and hence the ability to reduce the overall risk associated with a set of assets (as part of a portfolio or fund).
Overall, alternative assets are riskier than traditional assets, particularly in relation to the amount of uncertainty of their returns and the degree of price risk involved.
Alternative assets may be divided into tangible alternative assets and intangible alternative assets. Examples of the former class are gold and precious metals and real estate, while the latter consists of crypto assets, intellectual property, among others.
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