The core principle of portfolio construction, according to Sunanda Venkataraman, Head – Business Development at WhiteOak Capital, remains balancing growth, stability and diversification.
In that context, assets such as gold, REITs, InvITs and private market investments should not be treated as “extra” exposures, but as complementary components that behave differently from equities.
So, how much should you invest?
Venkataraman suggests that alternative assets can make up 20-30% of an overall portfolio, with 5-10% allocated to each underlying asset class.
This level, she noted, can help improve diversification without significantly increasing risk.
Gold, for instance, tends to have low correlation with equities and has historically preserved purchasing power over time, making it a useful inflation hedge.
REITs and InvITs provide exposure to real estate and infrastructure, offering relatively stable, low-beta returns compared to equities.
Private assets, including private credit, add diversification but come with higher credit and liquidity risks.
ALSO READ | PPF vs SIP: How safety, returns and inflation shape long-term investment choices
Do these assets still work as hedges?
According to Venkataraman, assets like gold and real estate continue to serve as effective hedges over the long term. Gold has maintained value across inflation cycles, while real estate typically benefits from rising prices and rental income during inflationary periods.
However, she cautioned that not all segments perform equally, especially within real estate. In India’s current phase of relatively moderate inflation and interest rates, these assets may become more effective hedges if macro conditions reverse.
Risks investors often miss
A major gap, she said, is the lack of understanding of underlying risks.
Alternative investments often come with liquidity constraints, complex structures and layered costs, including performance and operational fees.
Lock-in periods can restrict exits, particularly in certain fund structures. Taxation also varies widely depending on the asset class and investment vehicle. Liquidity risk is especially high in segments like private credit, where investors may struggle to exit during market stress.
Where should beginners start?
For first-time investors, Venkataraman recommends starting small—5-10% allocation initially—and focusing on simpler, more liquid options such as gold, REITs and InvITs.
While many alternative investments are accessed through AIFs and PMS structures with higher minimum investment requirements, evolving regulations and newer retail-oriented products are gradually improving accessibility.
She said that investors should align allocations with their risk appetite and liquidity needs, ideally with the guidance of a financial advisor.
ALSO READ | Income Tax Dept launches new TRACES portal: What changes for TDS filing
