Best alternative investments to diversify your portfolio

What are alternative investments?

Alternative investments are assets that fall outside the traditional categories of public equities, government bonds, and cash. They include:

• Physical and listed commodities including gold, oil, silver, and agricultural products
• Private equity — ownership stakes in non-listed companies
• Private credit — loans to companies through non-bank lenders
• Infrastructure — investments in physical assets such as roads, energy networks, and data centres
• Hedge funds — pooled vehicles using a range of strategies including long-short equity, macro, and arbitrage
• Collectibles — tangible assets including fine art, vintage wine, classic cars, and rare coins
• Digital assets — cryptocurrencies and tokenised assets

The common thread is that most alternatives have lower correlation to public equity markets than traditional asset classes, making them useful diversifiers even when their absolute return profiles are uncertain.

Why add alternatives to a portfolio?

The primary case for alternatives is diversification — they tend to move independently of equities and bonds, which reduces overall portfolio volatility without necessarily reducing returns.

During the 2008 financial crisis, global equities fell 40-50%. Select alternative categories — including commodities, managed futures, and certain hedge fund strategies — posted positive returns over the same period. More recently, gold delivered a 27% return in 2024 and reached new all-time highs in April 2025 above $3,500 per troy ounce, while equities experienced significant volatility during the same period.

A balanced allocation might combine 20% alternatives with 80% core equities, bonds and cash — split across listed infrastructure trusts, bond substitutes, a gold ETF, and selective commodity exposure.

Gold and precious metals

Gold is the most widely held alternative asset among UK retail investors and the most accessible. It has historically acted as a store of value during periods of economic stress, currency weakness, and inflation, and tends to be negatively correlated with the US dollar.

Gold reached a record high above $3,500 per troy ounce in April 2025, driven by central bank buying, US dollar weakness, geopolitical uncertainty, and strong demand from Asian investors. As of June 2026, prices have moderated but remain significantly elevated relative to five-year averages.

For UK investors, the most practical routes to gold exposure are gold ETFs — such as the iShares Physical Gold ETC (SGLN) or the Invesco Physical Gold ETC (SGLD), both London-listed and ISA-eligible — or spread bets and CFDs on spot gold prices, which are available through our platform with no stamp duty and, for spread bets, free from CGT.

Silver, platinum, and palladium offer similar inflation-hedging and store-of-value characteristics, with higher volatility and more industrial demand drivers than gold. All are available to trade with us.

Commodities

Commodities encompass physical goods including energy (oil, natural gas), metals (copper, aluminium, nickel), and agricultural products (wheat, corn, soybeans, coffee). They are among the most directly inflation-sensitive assets — their prices tend to rise when general price levels rise, since they are the raw inputs to the economy.

The commodity cycle turned in 2021 as post-pandemic demand surged and supply chains struggled to keep up. Since then, commodity markets have moderated but remain structurally supported by energy transition spending — the shift to renewables requires enormous quantities of copper, lithium, and other critical materials. Infrastructure investment associated with AI data centres is also a meaningful demand driver for copper and energy.

For most UK retail investors, commodity ETFs are the most practical access route. Broad commodity ETFs such as the iShares Diversified Commodity Swap UCITS ETF (ICOM) provide exposure across multiple commodity categories in a single instrument. With us, you can also trade individual commodity markets including crude oil (WTI and Brent), natural gas, copper, wheat, and gold directly via spread bets or CFDs.

Private equity and private credit

Private equity involves owning stakes in non-listed companies. It is one of the highest-return alternative categories historically, with institutional investors targeting low-double-digit returns — though achieving those returns in 2026 requires low-double-digit earnings growth from portfolio companies, making manager selection increasingly important.

For UK retail investors, listed private equity investment trusts provide the most practical access. HgCapital Trust (HGT), ICG Enterprise Trust (ICGT), and NB Private Equity Partners (NBPE) all trade on the London Stock Exchange and can be purchased through our share dealing account or ISA.

Private credit — loans made directly to companies by non-bank lenders — typically offers yields of 8-12% for senior secured lending to mid-market companies, though with illiquidity and credit risk. Listed investment trusts such as Intermediate Capital Group (ICP) and Ares Capital provide some exposure.

Infrastructure

Infrastructure investments — roads, bridges, energy networks, utilities, data centres, and renewable energy assets — are prized for their predictable, inflation-linked income and low correlation to public markets.

Listed infrastructure investment trusts on the London Stock Exchange include HICL Infrastructure (HICL), 3i Infrastructure (3IN), and Greencoat UK Wind (UKW). Many trade at or near their NAV and yield 4-7%, making them attractive income alternatives to bonds in portfolios where predictability matters.

The structural demand for infrastructure is growing, driven by energy transition capital expenditure and the expansion of digital infrastructure including data centres and fibre networks.

Hedge funds

Hedge funds use a range of strategies including long-short equity, global macro, event-driven, and systematic approaches to generate returns that are independent of market direction. Their primary value in a portfolio is decorrelation — the ability to make money regardless of whether equity markets rise or fall.

For most UK retail investors, direct hedge fund investment is inaccessible due to minimum investment requirements. Listed hedge fund investment trusts provide an alternative — BH Macro (BHMG) and Man GLG Income Trust (MGLI) are examples of London-listed vehicles with hedge-fund-like characteristics.

Collectibles and art

Fine art, vintage wine, classic cars, rare coins, and other collectibles can provide returns uncorrelated to financial markets. Art has historically returned approximately 8% per year over long periods, though with very high dispersion between outcomes and significant transaction costs. These assets are highly illiquid, difficult to value accurately, and require specialist knowledge.

How to access alternatives with us

With us, the most accessible alternative investments are available through:

• Spread bets and CFDs on gold, silver, oil, natural gas, copper, and agricultural commodities — available 24 hours a day with no stamp duty and, for spread bets, free from CGT
• Share dealing and ISA for commodity ETFs and listed alternatives investment trusts — including gold ETCs, infrastructure trusts, and listed private equity funds

For broader context on portfolio construction, see our guides on how to invest in dividend stocks, what are corporate bonds, and top investment themes for 2026.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invest. Alternative investments may be illiquid and harder to value than traditional assets.