Explain what alternative investments contribute within a portfolio spanning several asset classes

Alternatives are added for different purposes depending on type. Private equity targets capital growth above listed equity, often as leveraged equity exposure. Private credit and core real estate offer income. Hedge funds, especially macro or relative-value styles, aim to diversify and reduce drawdowns. Real assets such as infrastructure, timberland, farmland and commodities can hedge inflation. Each role should be linked to the client's objectives rather than to a label: a pension seeking income has different uses for alternatives than an endowment seeking growth. Diversification is easily overstated because appraisal-based returns are smoothed, which understates volatility and correlation with equities; unsmoothing reported returns reveals the true co-movement and the smaller diversification benefit.