Distinctive Characteristics of Alternative Markets

1. Limited access and closed-end structures. Most vehicles are closed-end funds with eight- to twelve-year terms and high minimum commitments. However, opportunities have recently emerged for a broader investor base via semi-liquid and open-ended vehicles such as evergreen funds.
2. Illiquidity and periodic valuation. Secondary-market sales are far more restricted than in public markets, and valuations are updated quarterly or semi-annually, which smooths volatility.
3. High specialisation. These investments are typically managed by seasoned sector experts, often adding significant value.
4. Performance-oriented remuneration. Managers are usually co-investors, aligning their interests closely with those of investors.

Why They Are Attractive

• Genuine diversification: Historic correlations with equities and bonds are low, reducing overall portfolio risk.
• Return potential: The risk premiums generated by alternative markets have historically exceeded those of public markets.
• Inflation protection: Certain strategies — such as regulated infrastructure or real-estate investments — allow income to track CPI.
• Future-proof themes: Many of these investments focus on high-demand sectors such as energy transition, digitalisation and demographic ageing, channelling capital into renewables, data centres and senior housing.
• Access to the unlisted economy: Alternative markets open the door to companies with high potential that are not yet publicly traded.
• Longer private lifecycles: Firms increasingly stay private for longer, achieving considerable scale before going public and creating attractive, high-return opportunities.

What to Watch Out For

• Dispersion of returns. Manager selection is critical: performance gaps between top- and bottom-quartile managers are wide. Partner with trusted, experienced professionals.
• Tax and regulatory structures. Vehicles may be domiciled in jurisdictions such as Luxembourg, Delaware or Spain, each with its own tax regime. Proper advice is essential to avoid double taxation.
• Total costs. While private-market returns have been higher historically, some strategies carry fees above those of traditional assets.

MoraBanc’s View

Alternative markets offer an attractive risk-return trade-off and diversification profile that is hard to replicate with traditional assets. They do, however, require a long time horizon, rigorous analysis and professional risk monitoring. For wealth or institutional investors, a gradual, well-advised integration can become a competitive edge. For retail savers, funds governed by regulations suited to their profile — such as ELTIFs in Europe — can provide a more accessible entry point. As always, the key is to understand where value is created… and what risks must be accepted to capture it.