Chapter 15
Alternative Investments

“Alternatives” not a distinct asset class, but an industry marketing label, and the term is doing a lot of work for the people selling it. What actually unites the things filed under it is a set of shared mechanics: an illiquidity lockup, a valuation nobody trades against, a fee structure with two layers, and an accreditation gate that substitutes wealth for disclosure. This chapter treats the two forms where those mechanics matter most and where the money actually goes — private equity and venture capital — because understanding one fund’s economics teaches you every other’s.

The rest of what gets sold as “alternative” has a canonical home elsewhere in this book, and this chapter does not repeat it:

Private real estate

Syndications, private funds, non-traded REITs, and DSTs carry precisely the private-equity fee stack described here, applied to buildings — section “Investing Passively: Syndications and Private Real Estate Funds” and section “Delaware Statutory Trusts (DSTs)”.

Private credit

Direct lending funds and bespoke single-asset lending — section “Private Credit and Bespoke Single-Asset Lending”.

Commodities, gold, and collectibles

Including the 28% federal rate that applies to collectibles gain — section “Portfolio and Investment Income”, with the allocation case made in chapter “Asset Allocation”.

Cryptocurrency

Treated as property, not currency or securities, with its own correlation, custody, and substantiation problems — chapter “Asset Allocation” and section “Donate Appreciated Securities”.

Hedge funds and every appraisal-marked strategy

The “volatility laundering” problem shared with everything in this chapter — section “Drawdown and Tail Risk”.