The traditional understanding of investment strategies often consists of a mix of liquid securities and stocks that can be easily bought and sold to quickly respond to market changes. In recent years, however, a trend has developed toward alternative investments that focus on long-term returns and diversification. In particular, illiquid investments such as private equity, infrastructure and alternative credit strategies are the focus of institutional investors and high net worth individuals.
The question is: are illiquid strategies superior to liquid investments? There are several arguments in favor of higher returns and a more stable portfolio through alternative investments. On the one hand, they offer higher returns than traditional investments, as they have more risks and time constraints. On the other hand, they are often independent from the fluctuations of the general markets and thus offer portfolio diversification. This diversification can be beneficial as it takes the pressure off the portfolio of stocks and bonds, which tend to be influenced more by similar factors.