As the name suggests, Alternative investments are financial investments that cannot be categorized as traditional, or conventional investments. For example, stocks, cash, and bonds are considered traditional assets whereas alternative assets can include private equity, hedge funds, art or antiques, Peer-to-Peer Lending, Real Estate investments, etc. 

Difference between Alternative and Traditional Investments

• Traditional investments, like stocks, bonds, and cash can be bought, sold, and traded on a public market. They are publicly traded and hence can be converted into cash and hence these investments are highly liquid. Traditional investments have to abide by regulations set for them. 
• Alternative investments are not publicly traded. Therefore, they cannot be converted to cash that easily. Compared to traditional investments, Alternate investments are more complex. 
• Alternative investments are considered riskier than traditional investments yet carry a greater opportunity for reward as they are not that liquid, alternative investments usually have longer investment timelines compared to traditional investments.

Benefits of Investing in Alternatives

• Lower Volatility: Alternate Investments are not that dependent on the market ups and downs, but more on the strength of each specific asset/investment. Therefore. Investing in Alternates can reduce the overall risk of a diversified portfolio.
• Broader Diversification: To have the benefit of a diverse portfolio, without much correlation to traditional asset classes, alternatives can be an extremely helpful way to expand and make extra profit.
• Enhance Returns: Alternatives can improve the risk and return profile of a portfolio and enhance total return through access to a broader universe of investments and strategies.

Why are Alternative Assets growing popular? 

Alternate Investment Markets are the newest investment trend, especially for higher net-worth individuals. With the digitization of retail investing practices and the newest trend of fractionalization, Alternative Investments are gaining popularity in India, as it gives Indian investors more opportunities to reach their investment goals faster because of the higher rates of returns and diversify their portfolio. 

As per SEBI data, as of May 2022, over 900 AIFs had been registered with the Securities and Exchange Board of India (Sebi), with capital commitments increasing at 63 percent CAGR between 2012 and 2022. Global alternative investment has increased from $4.1 trillion in 2010 to $10.7 trillion in 2020 and is expected to reach $17.2 trillion by 2025. 

As per expert projections, overall investments through AIFs will steadily grow at 25 percent CAGR by 2025. India will be one of the major players in the next wave of alternative growth, along with Asia.