Alternatives in Focus: Navigating the Risk and Return Landscape of Alternative Assets in Late 2025

Alternative assets—including private equity, real estate, hedge funds, commodities, and private credit—are in the spotlight as 2025 draws to a close. With traditional stocks and bonds experiencing increased volatility and lower yields, many investors are exploring alternatives for greater diversification and the possibility of improved returns. Below, we provide a balanced overview of how these asset classes have performed in 2025, as well as the risks and opportunities they present. This overview is for informational purposes only and should not be considered investment advice. Investors should consult with qualified professionals and review all relevant disclosures before making investment decisions.

Risk and Return Profile of Alternative Assets in 2025

Private Equity and Private Credit

Private equity is often associated with the potential for long-term outperformance, though returns in 2025 have moderated compared to previous years. Industry observers highlight the importance of manager expertise and rigorous selection, especially as higher interest rates and slower economic growth impact valuations and deal activity. Private credit, which can offer yields above those of traditional bonds, remains a focus for investors as lending standards tighten. However, these investments carry notable risks, including illiquidity, complexity, and the potential for default in higher-risk segments. Past performance does not guarantee future results, and all investments involve risk, including possible loss of principal.

Real Estate

Core real estate and private real estate funds have demonstrated resilience in 2025, frequently providing relatively stable income and potential inflation protection. Nonetheless, some property types—such as commercial office space—are contending with structural challenges, while residential real estate benefits from limited supply and demographic shifts. Real estate often behaves differently from stocks and bonds, which may help reduce portfolio risk, but it comes with its own risks, such as leverage and location-specific factors. Investors should carefully assess these considerations and review offering documents for full risk disclosures.

Hedge Funds

Hedge fund performance in 2025 has varied significantly by strategy. Macro and event-driven funds have encountered challenges due to unpredictable policy shifts and volatile markets, while certain relative value and long/short strategies have produced stronger outcomes. Hedge funds can offer diversification benefits, but outcomes differ widely and fees tend to be substantial. Investors should understand the specific strategy and associated risks before allocating capital. Past performance is not indicative of future results.

Commodities and Infrastructure

Commodities—including gold, oil, and agricultural products—are being considered by many investors as potential hedges against inflation and global uncertainty. However, commodity prices are volatile and returns may fluctuate significantly with changes in supply, demand, and geopolitical events. Infrastructure investments are also drawing interest for their potential to provide steady income, but they are subject to regulatory, operational, and development risks. Investors are encouraged to review all relevant offering documents and consider their own risk tolerance before investing.

The Bottom Line

In 2025, alternative assets may provide opportunities for diversification, enhanced yield, and inflation protection. However, they also carry significant risks, including illiquidity, greater complexity, high fees, and sensitivity to broader economic and policy shifts. The range of outcomes is likely to be wide, so proper manager selection and thorough due diligence are critical. This information is not a recommendation or an offer to sell or buy any security. Always consult with a qualified professional and review all disclosures before investing.

Disclosure:
This article is for informational and educational purposes only. It is not investment, legal, or tax advice and does not represent an offer, solicitation, or recommendation regarding any security, product, or service. Alternative investments may carry specific risks—including illiquidity and potential loss of principal—and are not suitable for all investors. Past performance does not guarantee future results. Consult with a qualified financial or investment adviser before making any investment decisions.

Sources:

https://privatebank.jpmorgan.com/nam/en/insights/markets-and-investing/ideas-and-insights/alternative-investments-in-2025-our-top-five-themes-to-watch
https://www.investopedia.com/performance-of-alternative-asset-classes-11724907
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https://www.elliottdavis.com/insights/whats-driving-alternative-investments-in-2025
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