Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
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Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.
Stock Traders pointing at Stock Market Fluctuations
Insights
Alternative Investments
Patrycja Binieda
· 8 min read
· Updated on

Alternative Investments 2025: What to expect

As we step into 2025, alternative investments continue to capture the attention of both retail and institutional investors. 

Amid economic volatility and shifting interest rates, alternative assets are increasingly recognised for their ability to enhance portfolio resilience. In December 2024, the U.S. Federal Reserve reduced the federal funds rate by 0.25 percentage points to a target range of 4.25%–4.50%, marking the third consecutive cut that year. 

Projections indicate two additional quarter-point reductions by the end of 2025. 

Similarly, the Bank of England may need to implement more aggressive interest rate cuts over the next year due to a weakening economy. 

These monetary policy adjustments, coupled with geopolitical uncertainties and market fluctuations, have underscored the importance of diversification. Asset managers are advising a defensively positioned portfolio with more fixed-income investments due to surging equity prices and limited scope for further interest rate cuts. 

In this context, alternative assets play a crucial role in mitigating risk and stabilising returns during uncertain times.

In this article, we’ll explore the emerging trends shaping the alternative investment landscape and highlight the asset classes expected to be in the spotlight over the coming year. Drawing on insights from the past year, we’ll see how these alternative investments could offer investors opportunities for growth and stability in an ever-evolving economic environment.

 

Private Equity 

Private equity is expected to remain a cornerstone of alternative investment portfolios in 2025. Private equity has historically outperformed public equity markets, with annualized returns of around 10.5% compared to 7.0% for public equity. Its long-standing reputation for delivering consistent, long-term returns makes the asset class a strong choice, especially in a market marked by economic uncertainty. Investors are increasingly drawn to private equity for its stability and its ability to adapt to changing market conditions, and in 2025 this quality is set to remain invaluable.

Key sectors like technology, healthcare, and renewable energy are likely to dominate private equity activity in 2025, as reported by Preqin. These areas reflect broader market trends and societal priorities, with investors eager to capitalise on growth in high-demand industries. Retail investors are also gaining greater access to private equity through innovative fund structures, making the asset class an appealing option for a broader audience.

"Private equity continues to attract investors seeking stable, long-term returns, even in fluctuating markets." - Financial Times


Key Points:

  • Stable Returns: Private equity offers consistent, long-term returns, even in fluctuating markets.

  • Focus on Growth Sectors: Technology, healthcare, and renewable energy are predicted to remain key areas of activity (Preqin, 2024).

  • Retail Investor Access: Innovative fund structures are enabling broader participation, enhancing private equity’s appeal.

  • Robust Fundraising: Strong investor interest is expected to drive continued fundraising success in the sector.



Real Estate

The UK real estate sector is set for significant evolution in 2025, with thhe growth focus shifting towards key subsectors that reflect broader economic and societal changes. 

As reported by the 2024 CBRE Outlook, industrial real estate, particularly logistics hubs like warehouses and fulfilment centres, will remain a standout performer. The ongoing boom in e-commerce is set to drive this demand, with investors keen to capitalise on it.

Meanwhile, the multifamily housing sector will continue to see strong interest, driven by ongoing housing shortages in many regions. This presents an opportunity for investors to address a critical societal need.

According to GRESB 2024, sustainability will also play an increasingly prominent role in shaping real estate investment strategies. ESG (Environmental, Social, and Governance) considerations are driving a surge in demand for energy-efficient and environmentally conscious developments.

"The surge in e-commerce, accelerated by the COVID-19 pandemic, has drastically increased the demand for fulfillment centers and last-mile delivery hubs." - Forbes

Key Points:

  • Industrial Real Estate: E-commerce growth continues to fuel demand for logistics infrastructure, including warehouses and fulfilment centres (CBRE Market Outlook, 2024).

  • Multifamily Housing: Housing shortages are expected to maintain strong interest in multifamily developments.

  • Sustainability: ESG-focused projects, particularly those prioritising energy efficiency and environmental responsibility, are likely to gain traction (GRESB, 2024).

  • Sector Evolution: Real estate investments are adapting to reflect economic shifts and societal priorities.



Infrastructure Investment

Infrastructure investment is set for substantial growth in 2025, driven by collaboration between public and private sectors to address global challenges. 

Renewable energy projects are expected to take centre stage, with governments and corporations working towards net-zero carbon emissions. According to Irena, Investments in solar, wind, and energy storage infrastructure will expand, supported by policy incentives and the increasing affordability of renewable technologies.

Digital infrastructure will also see significant growth. The increasing demand for data centres, fibre networks, and 5G systems will drive capital allocation, reflecting the growing importance of robust digital infrastructure in supporting technological innovation.

"To reach net zero emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 to around $4 trillion." - IEA

Key Points:

  • Renewable Energy: Investments in solar, wind, and energy storage are set to grow as nations pursue net-zero goals (International Renewable Energy Agency, 2024).

  • Digital Infrastructure: Expanding data centres, fibre networks, and 5G systems will drive significant capital allocation.

  • Public-Private Collaboration: Joint initiatives are supporting large-scale infrastructure projects globally.

  • Sustainability Focus: Infrastructure investments are increasingly aligned with environmental and technological priorities.



Private Credit

Private credit is emerging as a compelling alternative to traditional fixed-income investments, with its appeal expected to grow in 2025. Offering competitive yields in a rising interest rate environment, private credit is becoming particularly attractive to income-focused investors seeking enhanced returns.

The sector’s resilience in volatile markets further solidifies its position as a reliable and varied option for diversifying portfolios in 2025. Within private credit, investors have a range of strategies to choose from, including direct lending and distressed debt, making it a versatile asset class for varying risk-return preferences.

"Private credit, which generally consists of floating rate loans, may be resilient in a rising rate environment." - Blackstone


Key Points:

  • Attractive Yields: Private credit offers competitive returns, making it appealing amid rising interest rates.

  • Diverse Strategies: Investment options include direct lending, distressed debt, and other customised approaches (Institutional Investor, 2024).

  • Institutional Demand: Pension funds and endowments are driving increased allocation to private credit.

  • Portfolio Diversification: Private credit provides stability and income, complementing traditional fixed-income investments.

 

Venture Capital

Venture capital (VC) will continue to be a driving force behind innovation across growing businesses in 2025, and as such presents a lucrative alternative investment asset class for growth-focused investors. 

AI and FinTech are expected to dominate VC activity, as these sectors drive new applications and disrupt traditional industries. Startups leveraging AI for automation, decision-making, and predictive analytics, alongside FinTech innovators enhancing financial accessibility, will likely attract substantial funding.

Another key trend is the rising focus on climate technology across industries. Startups addressing environmental challenges, such as carbon capture and renewable energy, are gaining attention. Additionally, geographic diversification will continue to play a significant role, with emerging markets offering untapped opportunities. This increasing interest in innovative solutions is also reflected in the growing appeal of the EIS and SEIS.

In the UK, venture capital investors can take advantage of the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), which offer tax reliefs for investing in early-stage companies. These schemes are particularly appealing to investors looking to support innovative startups while benefiting from tax incentives.


"VCs have an unprecedented chance to back five transformative technologies."
- Business Insider


Key Points:

  • AI and FinTech: These sectors are predicted to lead VC investment due to their disruptive potential.

  • Climate Technology: Startups focusing on sustainability, including carbon capture and agriculture, are gaining traction (PwC State of Climate Tech Report, 2024).

  • Emerging Markets: Geographic diversification is opening new opportunities for VC in less developed regions.

  • Innovation Focus: Venture capital remains central to fostering cutting-edge solutions and economic development.



ESG-Aligned Investments

ESG-aligned investments are set to gain even greater prominence in 2025. Investors and regulatory bodies are increasingly prioritising sustainability and accountability, embedding ESG principles across various asset classes, including private equity, real estate, and public markets.

In the United States, ESG assets are projected to reach over $35 trillion in 2025, according to Lythouse, reflecting a significant shift towards sustainable investing.

Thematic investing is driving growth in this space, with areas such as clean energy, social equity, and sustainable supply chains attracting significant attention. Enhanced regulatory requirements and rising investor demand for transparency are accelerating the adoption of ESG-aligned strategies.

"Responsible investment involves considering environmental, social and governance (ESG) issues when making investment decisions and influencing companies or assets." - PRI


Key Points:

  • Integration Across Asset Classes: ESG principles are being embedded in private equity, real estate, and public markets.

  • Thematic Investing: Focus areas include clean energy, social equity, and sustainable supply chains (MSCI ESG Trends to Watch, 2024).

  • Regulatory Drivers: Enhanced disclosure requirements are pushing companies and funds towards greater ESG alignment.

  • Investor Demand: Growing interest in responsible investing is driving the expansion of ESG strategies.



Digital Assets

Digital assets are set to remain a dynamic and evolving segment of the alternative investment landscape in 2025, driven by advancements in technology and increasing regulatory clarity. 

The expansion of regulated digital asset funds and investment vehicles is expected to enhance institutional participation, providing a more structured and secure environment for investors. As digital assets mature, their appeal as a legitimate and innovative asset class continues to grow, particularly among institutions seeking diversification and exposure to cutting-edge technologies.

The Business Research Company reports that the digital asset management market is projected to reach over $7.38 billion by 2025, reflecting a compound annual growth rate (CAGR) of 14.2%. 

Beyond cryptocurrencies, blockchain technology is emerging as a focal point for investment, with applications across industries such as supply chain management, healthcare, and finance gaining traction. Regulatory developments worldwide are also contributing to this growth, as clearer frameworks reduce uncertainty and encourage broader adoption. These trends highlight the potential of digital assets to transform traditional industries and create new opportunities for investors.

"Institutional investors are interested in investing in tokenized private funds and securities (e.g., bonds, stocks) the most, citing access to new asset types, increased liquidity, and increased transparency as primary drivers for their interest." - EY


Key Points:

  • Institutional Participation: Regulated funds and investment vehicles are driving increased interest from institutional investors (CoinDesk Research, 2024).

  • Blockchain Innovation: Investments are expanding into blockchain applications beyond cryptocurrencies.

  • Regulatory Clarity: Evolving global frameworks are fostering confidence and broader adoption.

  • Technological Advancements: Continued innovation is solidifying digital assets as a transformative asset class.

 

Hedge Funds

Hedge funds are poised to remain significant players in the alternative investment landscape in 2025, offering unique benefits that enhance portfolio resilience. Their ability to employ diverse strategies, such as long/short equity and credit funds, allows them to capitalise on market inefficiencies and generate returns uncorrelated with traditional assets. For instance, in 2024, the hedge fund industry achieved an average asset-weighted net return of 6.1% in the first half of the year (Aurum).

Macro strategies are expected to gain prominence, leveraging opportunities arising from interest rate fluctuations and geopolitical developments. These strategies enable hedge funds to navigate broad economic trends and deliver returns even in challenging market conditions.

Event-driven strategies are also anticipated to be a focal point, according to the EY Global Alternative Fund Survey 2024,  with corporate mergers, acquisitions, and restructuring providing fertile ground for investment opportunities. Additionally, market-neutral strategies are likely to attract attention as investors seek balanced, risk-adjusted portfolios to weather ongoing market volatility. 

Notably, Chris Rokos's macro hedge fund gained almost 31% in 2024, demonstrating the potential of such approaches.

The ability of hedge funds to deploy diverse and adaptable approaches ensures their continued relevance in a rapidly evolving financial ecosystem.

Key Points:

  • Macro Strategies: Hedge funds are poised to benefit from interest rate changes and geopolitical shifts.

  • Event-Driven Opportunities: Mergers, acquisitions, and corporate restructuring remain central to hedge fund strategies (EY Global Alternative Fund Survey, 2024).

  • Market-Neutral Approaches: Demand for balanced, volatility-resistant portfolios supports market-neutral strategies.

  • Adaptability: Hedge funds’ flexible approaches allow them to thrive in dynamic market conditions.



Collectibles and Luxury Assets

Collectibles and luxury assets, including fine art, vintage cars, and rare wines, are expected to remain a niche but attractive focus for investors in 2025. 

These assets offer a unique combination of financial potential and personal enjoyment, making them particularly appealing to high-net-worth individuals. Their low correlation with traditional asset classes also positions them as effective tools for portfolio diversification, providing stability and resilience during periods of market volatility.

In 2025, the collectibles sector is projected to reach a market size of $484.6 billion, with an annual growth rate of 9.2% according to PR Newswire.

This growth is driven by increasing demand for luxury items and the tangible nature of these investments, which offer both aesthetic and financial value. More supporting reports from the Business Research Company shows that the luxury resale market is expected to grow at a compound annual growth rate (CAGR) of 9.9% from 2025 to 2034, indicating a strong and sustained interest in luxury assets.

In addition to their investment potential, the cultural and emotional value of collectibles enhances their appeal. Ownership of rare and iconic items often represents a blend of passion and prestige, further driving interest in this sector. 

As global wealth continues to grow, the demand for unique and luxury assets is likely to increase, solidifying their role as a distinctive segment of the alternative investment landscape.

Key Points:

  • Portfolio Diversification: Collectibles provide low correlation with traditional investments, enhancing portfolio stability (Knight Frank Wealth Report, 2024).

  • Cultural Appeal: Fine art, vintage cars, and rare wines offer a blend of financial and emotional value.

  • High-Net-Worth Interest: These assets remain a popular choice for affluent individuals seeking unique investments.

  • Growing Demand: Rising global wealth is expected to fuel interest in luxury and collectible assets.



Conclusion

Looking ahead to 2025, the alternative investment landscape is poised for significant expansion, driven by technological innovation, evolving regulatory frameworks, and increased accessibility. Retail and institutional investors are embracing a broader range of alternative assets, from private equity and real estate to digital assets and ESG-aligned investments. Innovative platforms and fund structures are democratizing access, enabling more investors to participate in previously exclusive markets.

In 2025, the digital asset management market is projected to reach $7.38 billion, reflecting a compound annual growth rate (CAGR) of 14.2%. This growth is driven by increasing demand for luxury items and the tangible nature of these investments, which offer both aesthetic and financial value. Additionally, the luxury resale market is expected to grow at a CAGR of 9.9% from 2025 to 2034, indicating a strong and sustained interest in luxury assets.

These trends, along with lessons learned from market movements in 2024, suggest that alternative investments will remain a crucial component of investment strategies. Staying informed and adaptable will be key for investors looking to capitalize on the opportunities ahead. By monitoring developments in these sectors, investors can position themselves to navigate an increasingly complex financial environment in 2025 and beyond.
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Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.