Alternatives and Private Investments: Who They’re For

A few years ago, alternative investments were something clients asked about after reading about a university endowment. Now they are advertised during sports broadcasts. Private credit funds, real estate interval funds and private equity vehicles are reaching investors who were never offered them before, with marketing that emphasizes yield and “access” and says less about what you give up. We get asked about them most weeks now, and our answer is more often no than yes.

What counts as an alternative

The label covers anything outside the traditional public markets.

• Private credit: loans made directly to companies, often mid-sized businesses that do not issue public bonds. Returns come from interest, which has been attractive in a higher-rate environment. Risks include borrower defaults, limited pricing transparency and the fact that the loans cannot be sold quickly.
• Private equity: ownership stakes in companies that are not publicly traded, acquired with the intent to improve and sell them years later. Capital is called over time and returned over a decade or more.
• Private real estate: direct property or funds that hold it, offering income and potential appreciation with less daily price noise than public REITs, partly because the holdings are appraised rather than traded.
• Hedge and absolute return strategies: funds that use leverage, shorting or derivatives to pursue returns independent of market direction.

Interval funds and tender-offer funds are newer wrappers that hold these kinds of assets and allow limited redemptions, usually quarterly and capped. They are more accessible, but “limited redemptions” is the key phrase: in a stressed period, you may not be able to get out when you want.

What you actually give up

Liquidity. This is the big one. A public stock fund can be sold today. A private fund may lock your money for seven to twelve years, with no secondary market worth the name. An interval fund may let you redeem 5 percent of the fund per quarter, shared among everyone who asks. If your plan might need that money, it does not belong here.

Fees. Management fees are typically higher than for public funds, and many structures add a performance fee on gains. Those costs are not disqualifying if the strategy earns them, but they raise the bar.

Transparency and valuation. Private holdings are valued by appraisal or model, not by a market. Smooth reported returns partly reflect that method. A lack of visible volatility is not the same as a lack of risk.

Complexity. Capital calls, K-1 tax forms that arrive late and sometimes require extensions, state tax filings in multiple places, and subscription documents that run dozens of pages. Each is manageable; together they are a cost in time and in accounting fees.

Who is eligible

Most private funds require you to be an accredited investor, which under current rules means roughly $200,000 of income ($300,000 with a spouse) in each of the last two years, or $1 million of net worth excluding your home, or certain professional licenses. Some funds require qualified purchaser status, generally $5 million in investments. Interval funds and some registered vehicles have lower or no thresholds. Eligibility is a legal floor, not a recommendation; qualifying does not mean you should.

Who they are for

In our practice, alternatives make sense for a client when all of the following are true.

• The core portfolio of diversified public stocks and bonds is already built and funded for the plan’s goals.
• There is a long horizon for the money in question, measured in a decade or more, and no realistic scenario in which it is needed sooner.
• Cash reserves and liquid investments cover several years of spending without touching the private allocation.
• The client understands and accepts that the money cannot be accessed on demand, and that reported values are estimates.
• The specific fund has been evaluated on its manager, strategy, fees, terms and the role it plays, not on a yield in an advertisement.
• The allocation is sized so that even a poor outcome does not change the plan.

For a retiree living on portfolio withdrawals, that often means a small allocation or none. For a business owner or executive with a long horizon and substantial liquid assets, a modest slice of private credit or real estate can add a return source that behaves differently from public markets. We are candid when the answer is no.

How we evaluate a specific fund

Where suitable, and where a client meets the eligibility requirements, we may include alternative investments through the platform available to us. Each one is assessed on who manages it and their record through difficult periods, what the strategy actually does, the full fee load including performance fees, the redemption terms in plain language, the tax reporting burden, and the role it plays in the portfolio. We say no to far more than we say yes to.

Where this fits

Alternatives are the last thing we add to a portfolio, never the first. The order on our portfolio management page is deliberate: the plan decides the allocation, the allocation is built from diversified public markets, and only then do we ask whether a private allocation adds something the plan needs. If you have been offered a private investment and want a second opinion before signing, that is a good use of a 20-Minute Fit Call.

Frequently asked questions

Written by Samuel Preine, Wealth Advisor, RJFS. Last reviewed: October 28, 2026.