"What's the best alternative investment?" is one of the most common questions we get, and it doesn't really have a single answer. Private equity, property bonds, fixed income alternatives and fine art all sit under the same broad umbrella, but they behave in very different ways, and the best fit for one investor's goals can be entirely wrong for another's. If you haven't already seen the full range of what's available, our map of alternative investment options in the UK is worth reading first so you can see the categories side by side.
This article isn't about picking a winner. It's about the questions worth asking when you weigh one asset class against another, so you can work out which category actually fits your goals before you get anywhere near comparing specific providers. That second step, evaluating the firms that introduce these opportunities, their regulatory status, track record and how they're paid, is covered separately in our guide to comparing alternative investment providers. Read that once you've settled on a category. This one is about the category decision itself.
The dimensions that actually matter
Asset classes are hard to compare fairly because they don't share a common yardstick. A private equity stake and a property bond aren't measured the same way, so rather than asking which one is "best" in the abstract, it helps to break the comparison down into the factors that actually affect whether an investment suits you.
- Minimum investment: how much capital you need to get started
- Liquidity: how easily, and how quickly, you could get your money back
- Volatility: how much the value or outcome can vary
- Income vs growth: whether returns arrive along the way or only at the end
- Complexity: how straightforward the structure is to understand and check
Minimum investment sets the floor for who can realistically participate at all, and it varies enormously even within a single category depending on the provider and the structure. Liquidity determines what happens if your circumstances change and you need access to your capital sooner than planned; with most alternatives, the honest answer is that you can't. Volatility is less about day-to-day price swings, since most of these assets aren't traded daily, and more about how uncertain the eventual outcome is. Income versus growth shapes whether an investment suits someone who wants cash flow now or someone happy to wait for a lump sum later. Complexity affects how easily you, or an adviser, can actually assess the risk you're taking on.
Three categories, compared directly
To make this concrete, here's how three common categories stack up against each other on those dimensions. These are general tendencies rather than fixed rules, since individual opportunities within each category can vary a good deal.
Private Equity
- Minimum: often substantial, sometimes far higher than other categories
- Liquidity: very low, five to ten year lock-up typical
- Volatility: high, outcome tied to individual companies
- Return profile: growth-focused, no income along the way
- Complexity: high, fund structures and staged capital calls
Property Bonds
- Minimum: typically lower than private equity, varies by issuer
- Liquidity: low, fixed term with no secondary market
- Volatility: lower, return is fixed if the borrower repays
- Return profile: income-focused, fixed rate over a set term
- Complexity: moderate, hinges on security and loan terms
Fixed Income Alternatives
- Minimum: varies widely by issuer and instrument
- Liquidity: low to very low, rarely any secondary market
- Volatility: generally lower, but credit risk remains
- Return profile: income-focused, predictable if the issuer performs
- Complexity: moderate to high, depends on the instrument
The pattern worth noticing is that lower volatility doesn't mean lower risk, it usually just means the risk is concentrated differently. Private equity's risk is spread across a company's whole trading future; a property bond's risk is concentrated on a single borrower's ability to repay on a single date. Neither is automatically safer, they simply fail in different ways. If property bonds look like a reasonable fit for your goals, our guide to the best property bonds in the UK compares specific options in more depth, and if fixed income alternatives are more your territory, our guide to the best fixed income investments in the UK does the same.
Matching the category to your goals
Investors chasing long-term capital growth and willing to accept illiquidity and a real chance of loss tend to gravitate towards private equity or, for something more tangible, private and commercial real estate. Those who want a more predictable, income-style return, and are willing to trade upside for certainty, tend to look at property bonds or other fixed income alternatives instead. Investors who want a liquid diversifier that doesn't behave like the rest of their portfolio often turn to gold, while those with a genuine interest in a specialist market, fine art or whisky casks, tend to accept lower liquidity and less measurable returns in exchange for holding something they actually care about. Our full directory of alternative investment options covers all of these categories in more depth if you want to widen the search before narrowing it down.
Once you've chosen a category
Picking the right category is only the first decision. The second, working out which specific firm or opportunity within that category is worth your money, is a different exercise altogether, and one we've deliberately kept separate. Our guide to comparing alternative investment providers covers the regulatory checks, track record questions and fee structures worth understanding before you commit capital to any single firm.
Once you've narrowed things down to a category, our comparison tool can help you see live opportunities within it side by side.
This article is for general information only and does not constitute financial advice. Alternative investments carry a high degree of risk, including the potential loss of capital, and are not suitable for everyone. If you are unsure whether an alternative investment is right for you, seek independent advice from an FCA-authorised financial adviser.