The Investments You Keep Hearing About (And Why I’m Skeptical)
You’ve probably noticed it too.
All of a sudden, everyone is talking about alternative investments… private credit, private equity, private real estate. They’re being positioned as the next level. The insider access. The smarter move.
And naturally, clients are asking: Should I be doing this too?
Before you go down that road, I want to give you the context most people aren’t hearing.
Why You’re Suddenly Hearing About These Investments
For years, large investment firms made a lot of money managing traditional funds and charging relatively high fees.
Then something changed.
Investors started paying attention. Low-cost index funds consistently outperformed expensive, actively managed funds over time. The data became undeniable.
So money moved. A lot of it.
Out of high-fee funds and into simple, low-cost index strategies.
That shift created a problem for the firms that were used to collecting those higher fees.
So they adapted.
Enter: Alternative Investments
Private investments became the new focus.
Not because they’re inherently better for you, but because they allow firms to continue charging higher fees in ways that are often less transparent.
We’re talking:
- 1–2% annual management fees
- Plus performance fees on top of that
- Plus limited visibility into what you actually own
The pitch sounds appealing:
- “Access to exclusive opportunities”
- “Higher return potential”
- “Diversification beyond the stock market”
It’s compelling. And it’s working.
The Part That Gets Left Out
What’s often downplayed—or skipped entirely—is liquidity.
With most private investments, your money is not easily accessible.
You can’t just log in and sell when you need cash.
Instead:
- You’re locked in for years
- The fund decides when (or if) you can redeem
- Some funds can gate investors, meaning they pause withdrawals altogether
We’ve already seen this happening recently with certain business development companies (BDCs) in private credit.
Investors wanted their money back.
They couldn’t get it.
That’s Not Just Inconvenient—It’s Risky
Imagine needing access to your savings—for a life event, an emergency, or simply peace of mind—and being told you can’t have it.
That’s not diversification.
That’s a level of risk most people don’t fully understand when they sign up.
So Who Is This Really Working For?
This is the question I always come back to.
Because when you follow the money, it becomes clearer.
The people doing exceptionally well here are the sponsors—the firms structuring and selling these investments.
Think companies like KKR or Capital Group.
They’re collecting consistent fees regardless of how the investment performs.
Meanwhile, investors are:
- Taking on more complexity
- Giving up liquidity
- Paying significantly more
That imbalance matters.
A Simple Question That Can Save You
Anytime someone presents a complex investment opportunity, pause and ask:
Who benefits most from this?
If the answer leans heavily toward the person selling it, that’s important information.
The Case for “Boring” Investing
There’s a narrative out there that investing needs to be exciting or cutting-edge to be effective.
In reality?
Boring often wins.
Simple, diversified, low-cost strategies have a long track record of doing exactly what they’re supposed to do—without locking up your money or layering on unnecessary fees.
And more importantly, they give you flexibility.
Final Thoughts
Alternative investments aren’t inherently bad. There are very specific situations where they can make sense.
But for most investors, they introduce more trade-offs than benefits.
You deserve to understand those trade-offs clearly before making a decision.
If you’ve been approached with one of these opportunities and aren’t sure how it fits into your bigger picture, I’m always happy to talk it through with you.
Because good financial decisions shouldn’t come from pressure or marketing.
They should come from clarity.