The traditional 60/40 portfolio is no longer the standard it once was. Today, some of the world’s most sophisticated investors – pension funds, endowments and foundations, family offices – are turning to alternative assets and private markets as core components of their investment strategies. Institutional portfolios often dedicate upwards of 25% to these assets, and for ultra-wealthy individuals, that number can easily exceed 50%. A main part of the appeal certainly starts with performance. Over the last 15 years, private markets have consistently outpaced public ones, delivering net annual returns of around 15%, compared to roughly 10% from global public benchmarks like the MSCI All World Index. But perhaps more compelling than raw returns is what private investments offer in terms of alignment, flexibility, and a more intentional deployment of capital. If you are exploring or expanding your exposure to alternatives, a few principles can make the difference between a scattered collection of bets and a cohesive, resilient strategy. Alternatives demand intentionality. Rather than reacting to deals as they come, effective investors approach this space with a clear roadmap, setting allocation targets, defining the balance between funds and direct deals, and establishing guidelines around check size, pacing, and coinvestment participation. The trade-off is illiquidity. Capital in private markets is often tied up for years, and the path to returns is anything but smooth. Distributions are uneven, capital calls can arrive at inopportune times, and timelines are rarely predictable. This reality makes it essential to plan not only your exposure but also your cash flows. One of the best on-ramps is through experienced fund managers. They offer infrastructure, sourcing capabilities, and operational expertise that’s hard to replicate early on. And while management fees can be steep, they often come with the benefit of access to deals, networks, and coinvestment opportunities. Fees aren’t always set in stone; for investors bringing size or a long-term commitment, managers are often open to discussing flexibility in terms. Perhaps the most overlooked characteristic in alternative investing is consistency. Commitments made steadily over multiple years help mitigate vintage risk and build exposure across market cycles. Whether your goal is 20% or 50% allocation, how you get there matters as much as when you start. These are among the most popular alternative investments, favored by investors chasing big upside in emerging and transformative companies. With returns ranging from -5% to 35% in VC, and 1% to 30% in PE, these funds provide investors broad exposure to private businesses with scale or breakout potential, managed by professionals who handle everything from deal sourcing to exits. While fees can be meaningful, so is the convenience, and in many cases, the upside. One tip: manager selection is everything. In venture capital especially, outcomes vary widely across funds. Unless you're in the top-performing group (top quartile or even decile), results may disappoint. These yield-focused strategies involve lending capital or pegging to revenue, rather than taking equity, offering a more predictable return profile and usually quicker access to cash flow. Timelines tend to be shorter, with returns typically capped, either through fixed interest payments or structured terms like revenue-based financing. While less volatile than equity, this class of investing of course still carries risk. A borrower default can lead to real losses, which is why strong underwriting and thoughtful diversification are essential. Returns in the U.S. generally range from the low single digits to the mid-teens, with higher yields available in global or niche lending markets. This corner of the private markets landscape is especially attractive for investors looking to generate yield, reduce portfolio volatility, or balance out more aggressive, equity-heavy exposures. Investing capital directly into companies, whether through equity or credit, can offer the strongest alignment with your values. It gives you the chance to back the people, ideas, and ecosystems you believe in, without layers of intermediaries (and as already mentioned, those dreadful fees). But that efficiency comes with a price: significantly higher effort and usually more risk. Unlike fund investing, direct deals demand hands-on involvement in sourcing, structuring, and ongoing oversight, often stretching a decade or more. The path is rarely smooth. Founders can pivot, stall, or surprise you, and losses are common in the early years before any winners emerge. Outcomes vary widely, from full capital loss to returns north of 25% for top performers, which is why it's critical to look at portfolio-level results rather than any single investment. This route is best suited to investors with deep conviction, sector expertise, and the time to actively engage. If you're looking for maximum alignment, are comfortable navigating uncertainty, and can build a clear strategy around position sizing and follow-ons, direct investing can be a uniquely rewarding (albeit demanding) way to deploy capital. A long-standing pillar of many investment portfolios, real estate offers the potential for steady income, long-term capital appreciation, and a natural hedge against inflation. Whether through direct ownership or fund structures, investing in physical properties can provide a level of tangibility and stability that appeals to a broad range of investors. Returns tend to be relatively consistent, with median outcomes around 10% and top-tier deals pushing into the low 20%'s. But real estate is also not without risk. Leverage is often the biggest threat, as projects burdened with too much debt can unravel quickly in the face of delays, cost overruns, or shifting market conditions. Add in regulatory surprises or zoning changes, and even well-planned developments can hit snags. Spanning infrastructure, commodities, farmland, and timberland, real assets offer exposure to the physical world, and with it, a different kind of return profile. These investments are prized for their stability, long-term horizons, and ability to hedge against inflation. Because they often move independently of public markets, they can also play a valuable role in portfolio diversification. Returns typically land in the mid-single digits, though outcomes can range from modest losses to strong double-digit gains depending on the asset, region, and timing. Large upfront capital requirements are common, and each project carries its own operational, regulatory, or geopolitical complexities. For investors with longer timelines and an appetite for less liquid, tangible investments, real assets can provide resilience, inflation protection, and a steady, if sometimes uneven, path to returns. These are the kinds of investments that double as passions - think art, classic cars, rare watches, fine wine, and more. While many investors don’t include them in a formal strategy (and often treat them as personal expenses), they can hold real value and sometimes even generate strong returns over time. They’re generally less correlated with traditional markets and can add a bit of personality to a portfolio, even if they’re not the most predictable performers. These typically include hedge funds, crypto, derivatives, and similar vehicles. While often grouped under the "alternatives" umbrella, these fall outside the scope of this piece, which is focused on private market strategies. Alternative investments span a wide, fascinating spectrum. What is covered in this article is only the beginning. Whether you're just getting started or looking to sharpen your strategy, there's always more to learn and explore in this space. If you're curious to go deeper, Clockwork can be a good resource. Clockwork engages closely with private investors, helping you build smarter, more resilient portfolios over time. About the Author Cory Shea is a Founding Partner of Clockwork, a private investment firm which he has co-directed since its start in 2016. Specifically, Cory leads Clockwork’s development of international business through the firm’s strategic base in Mexico City, overseeing efforts across client services, technology, and investment business lines. Cory's role has led to the formulation and delivery of Clockwork's investment advisory offerings as well as the launch of strategic investment partnerships and Clockwork’s institutional consulting offerings on asset allocation, investment strategy, and execution. Prior to Clockwork, Cory held founder, strategy, and consultant roles at leading Professional Services, Consumer, and Real Estate companies. Cory graduated summa cum laude from The Pennsylvania State University with a BS in Marketing and Information Systems Management.Why Alternatives Deserve a Place of Importance
Key Considerations for Alternatives
Examples of Alternative Investments
Private Equity & Venture Capital
Private Credit & Yield
Direct Investments
Real Estate
Real Assets
Lifestyle & Collectibles
Others
Final Thoughts
Modern Asset Allocation: A Primer On Alternative Investments
