Most people start the conversation with "should I buy a rental property?" Here's why that's the wrong question.
The most common version of this question we hear is some flavor of "my friend is into real estate, should I be doing that too?" The honest answer is almost never a clean yes or no. Real estate is the most universally asked-about category of what the industry calls "alternatives," but it is one of four that belong in the same conversation.
Most individual investors hold something close to a 60/40 portfolio: stocks and bonds, public markets, daily liquid. That is fine for many people at many wealth levels. The question worth asking is whether it is the right portfolio for you, given the size of your assets and the goals you have for them.
Major university endowments routinely allocate 30 to 50% of their portfolios to alternative investments. Most individual investors with comparable wealth allocate close to zero. The gap is rarely about access; it is usually about not knowing where to start.
This article walks through the four alternative categories that come up most often in real conversations: real estate, private credit, infrastructure, and private equity. Each one solves a different problem. Each one has a different fit. None of them belong in every portfolio, and at least one of them probably belongs in yours.
Who This Is For
- You have $1M+ in investable assets outside of your primary residence
- You hold most of your portfolio in public stocks and bonds, with limited exposure to anything else
- You have heard the words "private equity" or "private credit" and felt like you should probably know what they mean by now
The Four Categories Worth Knowing
Each of these is a category, not a single product. Within each one there is a wide spectrum of structures, fees, lockups, minimums, and quality. The descriptions below are starting points, not endorsements.
1 Real Estate
The most universally accessible alternative category. Real estate exposure can be obtained through public REITs (daily liquid, behaves more like stocks than direct property), private real estate funds (3-7 year lockups, typically requires accreditation, offers something closer to "real" real estate exposure), or direct property ownership (highest control, highest hassle factor, most concentrated).
Real estate plays three roles in a portfolio: it generates income, it provides some inflation protection (rents and property values tend to track inflation over long periods), and it diversifies away from public markets. Even a modest allocation can meaningfully shift portfolio behavior, particularly during equity drawdowns.
2 Private Credit
Lending to middle-market companies through private investment funds, rather than buying bonds from large issuers in public markets. Yields have generally been higher than public investment-grade bonds (often in the 7-11% net range), in exchange for illiquidity (3-7 year lockups), credit risk (these are not investment-grade borrowers), and accreditation requirements.
Private credit fits portfolios where the income-generating allocation is large enough that public bonds alone leave returns on the table. The trade is meaningful additional yield in exchange for giving up liquidity and accepting a different risk profile. Manager selection matters more here than almost anywhere else, because credit underwriting quality varies dramatically across funds.
3 Infrastructure
Investments in long-duration real assets: toll roads, airports, power generation, utilities, pipelines, data centers. These assets generate steady cash flows, often contractually inflation-linked, with demand that holds up across economic cycles. Listed infrastructure funds (mutual funds, ETFs) provide accessible exposure; private infrastructure funds offer better yield profiles but typically lock up capital for 10+ years and require accreditation.
Infrastructure tends to behave differently from both stocks and bonds, which makes it a strong diversifier. It is often the second alternative category investors add after real estate, because the income profile is similar but the underlying drivers (demographics, infrastructure spending, regulated rate bases) are uncorrelated with property markets.
4 Private Equity & Venture Capital
Equity ownership in private companies, generally through funds with 7-10 year lockups (sometimes longer for venture). Private equity invests in mature businesses, often with operational improvement strategies; venture capital invests in earlier-stage companies betting on growth. Both have historically produced higher returns than public equities, with correspondingly higher risk and dispersion between top and bottom managers.
This is the most demanding category in terms of access and patience. Most attractive funds require qualified purchaser status ($5M+ in investments), have minimums of $100K-$1M, and tie up capital for nearly a decade. The quality gap between top-quartile and bottom-quartile managers is enormous, which means manager selection is not optional. For investors who can clear these hurdles, private equity can meaningfully shift portfolio return potential.
See Which Categories Could Potentially Fit Your Situation
The tool below walks through five quick questions, your portfolio size, accreditation status, liquidity tolerance, time horizon, and what you are hoping to accomplish, and then shows which of the four categories could potentially fit your situation. It does not recommend specific funds or investments, because that is a conversation, not a tool.
What the tool assesses: the tool evaluates whether each of four alternative investment categories (real estate, private credit, infrastructure, private equity) could potentially fit your portfolio based on accreditation requirements, typical minimum investment sizes, liquidity profiles of available structures within each category, and whether the category aligns with your stated goals around income, growth, diversification, or downside protection.
A Common Scenario
Consider a hypothetical example. A couple in their early 50s has built up about $3.5M in investable assets, mostly in index funds and 401(k)s. They have a paid-off home, two kids out of college, and roughly 12 years until they plan to start drawing meaningful income from the portfolio. Their question, when they walk into a planning conversation, is almost always some version of "should we buy a rental property?"
The real question is different. Their current portfolio has zero exposure to anything outside public markets. The whole portfolio rises and falls with the same set of macro factors. A modest allocation, perhaps 15-20% of their assets across a private real estate fund and a private credit fund, would meaningfully diversify their return streams without locking up so much capital that liquidity becomes a problem.
None of which means they need to do this. It just means the question worth asking is broader than the one they walked in with. Real estate is the entry point. Diversification is the actual destination.
Is Your Portfolio Missing The Other 40%?
Major university endowments allocate 30 to 50% of their portfolios to alternatives. Most individual portfolios allocate close to zero. The right number for you is somewhere in between, but you cannot find it without first knowing what is actually available to you. A 15-Minute Discovery Call is a quick way to talk through which categories deserve a closer look, and which ones do not.
Book Your 15-Minute Discovery CallFrequently Asked Questions
What does accredited investor mean?
An accredited investor is generally someone with income over $200,000 individually (or $300,000 jointly) for the past two years, or net worth over $1 million excluding their primary residence. The status unlocks access to most private investment funds that are not registered for public sale.
How much of my portfolio should be in alternatives?
Institutional portfolios like university endowments often allocate 30 to 50% to alternatives, while individual investors typically allocate far less. The right percentage for you depends on your portfolio size, liquidity needs, time horizon, and what you are trying to accomplish, not on what other investors do.
What is the difference between public REITs and private real estate funds?
Public REITs trade like stocks and offer daily liquidity, but they often correlate more closely to the broader equity market than the underlying real estate. Private real estate funds offer access to direct property ownership with potentially less correlation to public markets, in exchange for lockups (typically 3-7 years) and higher minimums.
Do I have to be wealthy to invest in private credit or infrastructure?
Most private credit and private infrastructure funds require accredited investor status, and the most attractive funds often require qualified purchaser status ($5M+ in investments). Listed infrastructure funds and certain private credit interval funds have made these categories more accessible without those thresholds.
What are the typical fees on alternative investments?
Private fund fees are generally higher than public funds: a common structure is a 1 to 2% annual management fee plus 10 to 20% of profits above a hurdle rate. The fee math only makes sense when net-of-fee returns or diversification benefits genuinely justify the cost, which is why manager selection matters so much in this space.
How liquid are alternatives if I need access to my money?
Liquidity varies enormously by category. Public REITs and listed infrastructure are daily liquid; interval funds may allow quarterly redemption with limits; traditional private real estate, private credit, and infrastructure funds typically lock up capital for 3 to 10 years; private equity and venture capital often run 7 to 12 years.
This article is produced by Ceva Capital LLC dba Ceva Advisors. The information contained herein is intended solely to provide educational content to our clients and other readers that we find relevant and interesting. Opinions expressed are as of the date of publication and are subject to change. Nothing in this document should be construed as investment, tax, or legal advice; we provide advice on an individualized basis only after understanding your circumstances and needs. Information provided comes from sources we believe are reliable, but accuracy is not guaranteed.
