In short
An alternative asset is anything held outside the three traditional classes — listed shares, bonds and cash. The category covers property, private equity, private credit and lending, infrastructure, commodities, hedge funds and collectibles. What they share isn't a risk level or a return: it's that they're not traded on a public exchange, so they're usually less liquid and priced less often.
Definition
Outside shares, bonds & cash
Common trait
Not publicly traded
Usual trade-off
Return for access
Risk level
Varies enormously
01 — The short version
The short version
"Alternative asset" is a category defined by what it isn't. For most of the last century, ordinary portfolios were built from three things: shares, bonds and cash. Everything else — the farm, the office block, the stake in a private business, the loan to a developer — got grouped together under a single heading. That heading is "alternatives".
Which means the label describes the packaging, not the contents. A secured loan and a case of rare wine are both alternative assets, and they have almost nothing in common. If someone tells you they hold alternatives, you've learned roughly as much as if they'd told you they own furniture.
So the useful question is never "are alternatives good?" It's "which one, structured how, and what does it ask of me in return?" This article is about answering the first part of that properly.
02 — What counts as one
What counts as an alternative asset
The category is broad, but it breaks into a handful of recognisable groups.
Property. The most familiar alternative by far, and the one most South Africans already own. Direct property — a house, a flat, commercial premises — is an alternative asset. So, in a looser sense, are listed property funds and REITs, though those trade on an exchange and behave much more like shares as a result.
Private equity. Ownership stakes in companies that aren't listed. You're buying part of a business the public can't buy on the JSE, usually through a fund, usually with a long lock-up measured in years.
Private credit and private lending. Rather than owning a business, you lend to one — or to a project, a property development, or a body corporate. The return is the interest on the loan rather than growth in a share price. The distinction between private credit and private lending is largely one of scale and who's doing it.
Infrastructure. Roads, energy, water, telecommunications. Long-dated, often inflation-linked, historically the preserve of pension funds and very large mandates.
Commodities. Gold, platinum, agricultural products. South Africa has an unusually direct relationship with this group for obvious reasons. Commodities produce no income — the return is entirely whether the price moves your way.
Hedge funds. Pooled vehicles running strategies unavailable to conventional funds — short selling, leverage, derivatives. In South Africa these are regulated as collective investment schemes, which is stricter than in many countries.
Collectibles and tangibles. Art, wine, classic cars, rare items. Genuinely alternative, genuinely illiquid, and dependent on someone else wanting the same object later. Enjoyable to own; difficult to rely on.
03 — Traditional vs alternative
Traditional vs alternative, side by side
| Traditional | Alternative | |
|---|---|---|
| Examples | Shares, bonds, cash | Property, private credit, infrastructure |
| Where traded | Public exchange | Privately arranged |
| Pricing | Continuous, visible | Periodic or on event |
| Access to money | Usually days | Usually a term |
| Return driver | Market movement | Depends entirely on the asset |
| Minimum size | Often very small | Often meaningful |
The row that does the most work is pricing. A listed share is repriced every few seconds by thousands of strangers. Most alternatives are valued occasionally, or only when something happens. That's not automatically worse — but it does mean you can't confuse "the price didn't move" with "nothing changed".
04 — Why people hold them
Why people hold alternative assets
Three reasons come up repeatedly, and they're worth separating because they're not the same goal.
Returns that don't depend on the market rising. A share portfolio needs share prices to go up. A loan pays interest whether the JSE has a good year or a dreadful one — the borrower's obligation doesn't change with the index. For someone who has watched a portfolio go sideways for a few years, that's the appeal.
Income on a schedule. Many alternatives are structured to pay regularly rather than only when sold — rent from a property, interest from a lending arrangement. That matters enormously to anyone living off capital instead of a salary, which is why the question of income you can actually plan around comes up so often at retirement.
Diversification. The textbook reason. If everything you own responds to the same forces, a bad year for those forces is a bad year for everything. Assets that behave differently soften that. It's worth being honest that diversification is often oversold — in a genuine crisis, more things move together than the brochures suggest — but the principle holds.
The label tells you where something is traded. It tells you nothing about whether it's sound.
05 — The trade-offs
The trade-offs, honestly
Access is the big one. Nearly every alternative asset asks you to give up the ability to get your money quickly. A share can be sold on Tuesday. A property takes months; a fund stake may be locked for years; a loan runs to its term. This is the central bargain of the whole category, and it's a real cost — not a technicality. Money you might need should not be in an asset you can't reach.
Pricing is less frequent. Infrequent valuation can make an asset look steadier than it is. A property valued once a year appears calm; it simply isn't being asked its price very often. Be careful not to read that as low risk.
You're relying on something specific. An index fund spreads you across hundreds of companies. Most alternatives concentrate you on one thing — one building, one borrower, one manager. That's not inherently worse, but it does put more weight on whether that particular thing is sound, which is why the due diligence matters more here than almost anywhere else.
The structure can be complicated. Fee arrangements, terms and exit conditions in alternatives are frequently more involved than a unit trust's annual charge. If the structure can't be explained plainly, that's information in itself.
None of this argues against alternatives. It argues for knowing which specific one you're looking at, and what it's asking of you.
06 — The South African picture
The South African picture
Two features of the local landscape are worth knowing.
The first is Regulation 28 of the Pension Funds Act, which sets limits on how South African retirement funds may allocate across asset categories — including caps on holdings such as private equity and hedge funds. It doesn't apply to money you hold personally, but it's a useful signal: the regulator's position isn't that alternatives are unsuitable, it's that they belong within limits. Amendments in recent years have widened the room for infrastructure specifically.
The second is that access has broadened. Historically, most alternatives were effectively closed to individuals — the minimums assumed an institution. That's shifted. Property has always been reachable. Regulated hedge funds are available through conventional channels. And private lending arrangements have become accessible to individuals at amounts that would once have been ignored.
For offshore exposure there's an additional layer: South African exchange control governs how much you may take offshore each year — R2 million under the single discretionary allowance without SARS approval, and a further R10 million under the foreign investment allowance with it. Anyone considering offshore alternatives needs to account for that before anything else.
07 — Where private lending sits
Where private lending sits in the picture
Private lending falls inside the alternative category for the straightforward reason that it happens outside listed markets. But it's worth being precise about the mechanics, because the word "asset" can blur something important.
Most alternatives involve owning something and hoping it's worth more later — a stake, a building, an object. Private lending is a different structure: capital is advanced under a loan arrangement for a defined term, and the return is the interest paid on that loan. You're a lender, not an owner. There's no share price to follow, because there's no share.
That distinction matters practically. An owner's return depends on what someone will pay for the asset later. A lender's return depends on whether the borrowing is repaid under its terms — which is why what secures the loan and what happens if a borrower doesn't pay are the questions that actually determine the outcome, rather than market sentiment.
It shares the category's central trade-off in full: the capital is committed for the term and it is not guaranteed. What it doesn't share is the dependence on an asset appreciating. Whether that suits you is a separate question from whether it's a good structure — and it's the kind of question worth putting to someone who can walk through the specifics rather than the category.