Top 5 alternative asset classes for 2023


Have you been considering investing but you don't like the options available under traditional investments? Or have you tried out traditional investments such as stocks and bonds and are now considering a new form of investment to venture into? An alternative investment is the perfect answer.

Alternative assets have been [on the rise](https://microventures.com/history-of-alternative-investments) since the 20th century, and have recently gathered more acknowledgments for themselves, with experts advising them as a substitute for traditional investments.

![Graph showing the historical performance of alternative investments since 2021](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/historical-performance-of-alternative-investments-since-2001-min.webp)

## **What Are Alternative Assets?**

To fully understand what alternative assets are, one must first understand what an alternative investment is.

Alternative investment, just as the name suggests, is a form of investment outside the traditional investment opportunities. With this in mind, an alternative asset is an asset you can acquire, with the goal of selling it when its worth in the market has increased. One of the greatest challenges you might face when trading alternative assets is their illiquidity when compared to traditional assets. Determining a specific [price](https://carofin.com/glossary/valuation/) for such assets can also pose a difficulty.

## **Why Should You Invest in Alternative Assets?**

Alternative assets have been around for longer than you might realize. Most of them didn't have a specific name. Better still, the public didn't know they existed under the name. When investments are talked about, people categorize all as traditional investments (bonds, stocks, etc), but with the understanding of their difference from the definition above, we now understand that they're separate entities.

![Illustration showing Alternative Assets Under Management ($bn) comparison between 2020 and 2025](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/alternatives-assets-under-management-bn-2020-vs-compressed.webp)

**Here are some of the many benefits of investing in alternative assets.**

- By adding alternative assets to your investment portfolio, you have the chance of reducing the risk level of your investments.
- Returns on alternative investments are likely to be more than that of traditional investments.
- When you own an alternative asset, such as a painting, you have direct ownership of the asset. With the asset being entirely yours, you can decide not to sell the asset for as long as you wish — or as soon as you wish.
- As an owner of the asset, you become a part-owner of it, and the tax levied on the asset is reduced when you're to pay it.

There are many benefits arising from owning an alternative asset when compared to traditional assets and investments.

## **Top Five Alternative Asset Classes for 2023**

The market is ever-changing, with new trends arising, and new marketplaces getting attention. This constant shift makes it challenging to determine the largest and the lowest market bases. However, we've gathered the top 5 classes and they are detailed below:

### 1. Art and Collectibles

Have you ever attended an auction before? If you haven't, you must have at least seen one in movies. Remember how the price for what was being auctioned kept increasing until the Bid Caller found a final price?

When investing in arts and collectibles, remember that time equals higher returns. An example of this is the painting named A.B Still, painted by Gerhard Richter, a German visualist painter. The artwork was initially purchased for $264,000 in 1991. But by the time it was sold in 2016, the painting fetched a whopping $33,987,500, almost 4 million higher than it was predicted to [fetch](https://www.google.com/amp/s/www.businessinsider.com/famous-paintings-that-sold-for-millions-over-original-value-masterworks-2020-5%3famp) by experts.

![Artprice 100© vs. S&P 500 - Growth Comparison](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/index-level-1-min.webp)

So, if you happen to have money that you wish to use to invest, and you also have the time to wait for its value to increase, investing in arts or other forms of collectibles would be a great way for you to go.

### 2. Equipment Finance

Have you ever been in a situation where you needed equipment but couldn't afford it? Do you know anyone in such a situation? Then, equipment finance would be a perfect opportunity for the person.

Equipment finance is a form of finance that allows organizations to grant investors the opportunity to invest in equipment that can bring in money for them while they use it. In simpler terms, you can allow organizations to buy a stake in your equipment, and pay back the rest in installments.

Under this form of finance, you get to help businesses acquire needed equipment for work without having to pay large amounts upfront. The payment for this equipment is spread across an extensive period and you get to receive your payment for it, with your profit coming in via interests placed on the equipment.

![Bar chart showing global medical equipment financing market, by type, 2021 and 2023 (USD Billion)](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/global-medical-equipment-financing-market-by-type-2021-_-2030-usd-billion-min.webp)

Another good news about investing in equipment finance is the steady influx of organizations in need of equipment finance. According to research conducted by [Equipment Leasing & Finance Foundation](https://www.leasefoundation.org/) for 2021, [79.3%](https://www.store.leasefoundation.org/cvweb/cgi-bin/msascartdll.dll/ProductInfo?productcd=Horizon2022) of organizations that acquired software or equipment made use of equipment financing.

If you have enough money to buy large equipment needed by organizations, there is a steady amount of them waiting to lease it from, whole paying according to accepted terms, and increasing your wealth too.

### 3. Wine

Wine has been around for as long as history allows, and recently, there has been increasing popularity in the investment of the franchise as an alternative asset.

If you intend to invest in wine, understand that this investment will be a long-term one, as you'll collect the wine and keep it for a long time, allowing its worth to increase with time before selling it off.

![Performance comparison graph between Liv-ex fine wine 100 vs. S&P500](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/index-level-min.webp)

One of the greatest challenges for investors is an economic recession. However, wine has proven to retain its value during that period, and even increase over time.

Another advantage of this investment for you is that wines of top quality are in small quantities, as only small amounts are produced. The rarity surrounding such quality of wine increases over time as it becomes scarce in the market. Should you wish to buy wines, keep in mind that you'll need to wait for at least 10 years if you intend to make a large amount of return. If you can wait longer, the price will only increase. The Leroy Richebourg 1997 is said to have made a 1050% increase in price since its production date. Imagine you'd invested in it then

### 4. Litigation finance

Litigation as a means of investment is growing rapidly. Under this form of investment, you help people/organizations take cases to court but are unable to fund the entire process.

This is an essential form of investment as damages paid from the positive return of this investment are divided in percentages, in accordance to predetermined agreement.

Many cases that have been taken to court usually end with one party either abandoning it due to incapability to fund the entire process or inability to keep funding the process while it gets dragged in court. However, with litigation finance, you can assure justice is given a chance by investing in parties that have lesser money but could win the case if they had enough money for it.

![Chart showing litigation funding investment market, size, by type, 2020-2030 (USD Billion)](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/litigation-funding-investment-market-min.webp)

An organization named VLSI Technology Ltd also made [returns](https://news.bloomberglaw.com/ip-law/intel-told-to-pay-2-18-billion-after-losing-texas-patent-trial) for this form of investment after the organization made a $2.18 billion return from a case against Intel. As of 2017, litigation finance was reported to have grown by [413](https://www.verisk.com/insurance/insights/social-inflation/growth-of-litigation-funding/)% within 4 years. In 2022, the [funding](https://www.reuters.com/markets/us/litigation-funders-deployed-32-bln-us-investments-last-year-report-2023-02-16/) for litigation finance grew to $3.2 billion.

Investing in litigation finance, should it yield the desired result, pays lots of money in capital and as such would be a great investment for you.

### 5. Private Equity

Private equity helps a company grow. Private equities are investment capitals that are invested in private companies and also help in revamping them. By joining and investing your money in a private equity firm, you enable the firm to have the capital to use in investing in companies that need the investments but are not big enough to be listed on stock exchanges.

![Graph showing Private equity index vs. S&P 500 index historical performance](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/private-equity-index-vs.-s_p-500-index-historical-performance-min.webp)

Funds or direct investments are ways through which you can make private equity investments. With the help of the private equity firm that's managing the funds, you have access to an array of private companies to invest in. Under direct investment, you invest in a single private company.

So, if you have money that you wish to invest, and are not necessarily looking to receive the money back in at least five years, then private equity investment is for you. With your investment, the company increases in value, and after a couple of years, you can sell your investment at a profit.

## **Risk Level of Alternative Assets**

It would be demeaning to your level of experience to list all the positive sides of alternative investments without mentioning the risk levels to it too.

While alternative assets have the potential of providing large returns, there are also risks to them. Just as with traditional investments, alternative investments also should be treated with caution first!

![Illustration showing alternatives have significantly outperformed traditional investments](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Top%205%20alternative%20asset%20classes%20for%202023/alternatives-have-significantly-outperformed-traditional-investments-min.webp)

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There are no general determiners for the level of risk that comes with any form of investment, however, you can always have an expert talk you through the risk and return level, before deciding on which asset to invest in. That way, you can reduce the level of risk by making calculated, intelligent choices.

## **Is Alternative Assets Investment for You?**

If after reading this far, you still aren't sure whether alternative assets are things you should invest in, here is a list of some of the people who can invest in alternative assets:

- Retired investors
- Active investors
- Passive investors
- Investors focused on income
- Low-level risk investor

At this point, do you think you qualify as an alternative assets investor? Make the right choice and buy yourself an asset today. You'd be glad you did in years to come.

## **Conclusion**

Alternative assets are not new to the market and shouldn't have the potential of scaring you. With the help of calculated decisions, you can make the best investment, gaining large returns in a few years to come after your investment in any of the five choices listed above.


Alternative investments have been gaining popularity as investors seek diversification and higher returns beyond traditional options. They encompass a broad range of assets outside stocks and bonds, such as art, equipment finance, wine, litigation finance, and private equity. These investments offer various benefits, including reduced risk, potential for higher returns, and direct ownership of assets. However, alternative assets come with their own set of risks and may require expert guidance. They are suitable for various types of investors, including retirees, active and passive investors, and those seeking income or lower risk options. With calculated decisions, alternative assets can be a valuable addition to an investment portfolio, offering significant returns in the long term.

Top 5 alternative asset classes for 2023

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