Alternative Investments
What counts as an alternative investment, who is allowed to buy most of them, and the fees, lock-ups, and limited information that come with private funds and deals.
The short version
Alternative investments are anything outside stocks, bonds, and cash: private equity, venture capital, private credit, hedge funds, private real estate, commodities, and collectibles. Many private offerings are open only to accredited investors, who meet SEC income, net worth, or licensing tests. Private investments come with less disclosure and are hard to sell. Hedge funds typically charge 1 to 2% of assets a year plus 20% of profits, limit withdrawals, and may lock up your money for a year or more. Those costs set a high bar before an alternative beats a cheap index fund.
By the end of this lesson, you'll be able to
- Describe the main kinds of alternative investments
- Explain who can invest in private offerings and why
- Work out how fees and lock-ups change what an alternative has to earn
Why this matters
This lesson is optional. Alternatives are often described as what pension funds, endowments, and wealthy families own, and more of them are being marketed to individual investors. Some can play a real role. Many come with costs and restrictions that don't show up in the pitch. This lesson covers what they are and what to check. The Alternative Investments depth track covers them in full.
What counts as an alternative
An Alternative investment. Any investment outside stocks, bonds, and cash, such as private equity, hedge funds, private real estate, commodities, or collectibles. Glossary is anything outside the three traditional categories of stocks, bonds, and cash. The main groups:
- Private markets. Private equity. Investing in companies whose shares don't trade on a public exchange, often by buying whole companies or large stakes in them. Glossary invests in companies that don't trade on a public exchange, often buying whole companies. Venture capital invests in young startups. Private credit makes loans outside the public bond market.
- Hedge funds. Private funds with flexible strategies, covered below.
- Real assets. Private real estate, and the Commodities from earlier in this module.
- Collectibles. Art, coins, wine, cards, and similar things people buy hoping they'll rise in value.
Who can invest
Most private funds and deals are sold through private offerings, which aren't registered with the SEC. Many of the rules that allow them limit who can participate to Accredited investor. A person or organization that meets SEC tests for income, net worth, or certain professional licenses, and so may invest in many private offerings that others can't. Glossary. For an individual, that generally means one of the following:1
- a net worth over $1 million, alone or with a spouse or partner, not counting the value of your home
- income over $200,000, or $300,000 with a spouse or partner, in each of the last two years, with the same expected this year
- holding certain professional licenses: the Series 7, 65, or 82
The tests exist because a Private placement. A sale of securities that isn't registered with the SEC. Buyers get less information than in a public offering and often can't resell for a long time. Glossary doesn't have to provide the disclosure a registered public offering would. Private placements are also highly illiquid. You'll usually receive restricted securities, and the SEC advises being prepared to hold them indefinitely.2 Being accredited doesn't make a deal safe. It means the law assumes you can absorb the risk of having less information.
The rest of this lesson is for members
Still to come in this lesson: Hedge funds, Collectibles, the key takeaways, and 2 quiz questions with explanations.
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.
Go deeper
- Private Equity coming soonAlternative Investments (depth track)
- Hedge Funds coming soonAlternative Investments (depth track)
- Access, Fees, and Liquidity in Alternatives coming soonAlternative Investments (depth track)
- Collectibles and Other Alternatives coming soonAlternative Investments (depth track)
Learn more
- Hedge FundsInvestor.gov, U.S. Securities and Exchange Commission
- About BrokerCheckFINRA
Notes and sources
- U.S. Securities and Exchange Commission. Accredited Investors. Checked 2026-09-30. Back to text
- Investor.gov, U.S. Securities and Exchange Commission. Private Placements under Regulation D. Checked 2026-09-30. Back to text
- U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy. Investor Bulletin: Hedge Funds. Checked 2026-09-30.
- Internal Revenue Service. Topic no. 409, Capital gains and losses. Checked 2026-09-30.