Alternative investments are expected to yield higher and more consistent returns compared to traditional listed assets, and at the same time they contribute to risk diversification.
Alternative investments are often defined as the opposite of traditional investments as bonds, equities and credit bonds. However, alternative investments can also be defined on basis of their common characteristics:
- they do not fluctuate in keeping with the traditional investments, and consequently they contribute to a more consistent total return of the portfolio
- there is typically not a liquid market, and the assets usually yield an additional return compensating for this
- the single investments are typically very different – also within the same group
- they often require a long investment horizon
- the investment requires some ex ante analyses and typically an agreement that might be legally complicated
- it typically requires an investment running into millions.
Overall, DIP’s alternative investments consist of investments in private equity, alternative credit, forestry and infrastructure.