9 in 10 are aware of alternative investments

Real estate and cryptocurrency are the leading investment forms.

Nine in 10 are are aware of at least one type of alternative investment, like real estate, digital assets, private equity, insurance-linked securities, and securitised credit, a report by Schroders revealed

These alternatives offer diversification beyond the traditional stocks and bonds typically found in retirement portfolios, Schroders said.

Over half of the respondents (53%) already hold some form of alternative investment, with real estate and cryptocurrency leading. Moreover, 59% are keen on incorporating alternatives into their retirement portfolios, especially with the guidance of a professional investment manager.

Despite this interest, only 51% of respondents are familiar with the term "alternative investments," underscoring the need for better investor education about these assets and their role in retirement planning.

In Hong Kong, where life expectancy is rising, Schroders noted that many residents may not be financially prepared for longer lifespans. Investing in alternatives, such as real estate and infrastructure, can help mitigate longevity risks by offering more stable cash flows to sustain wealth over time.

Schroders noted that alternative investments, often less correlated to public markets like stocks and bonds, can provide a buffer against market volatility. However, these assets often come with liquidity limitations.

For instance, private equity and hedge funds offer the potential for high returns but usually require longer investment horizons and come with lower liquidity. Real estate, on the other hand, can generate income through rental yields and potential capital appreciation, while infrastructure investments offer stable cash flows, making them suitable for retirement portfolios.

Additionally, private debt funds may provide higher yields than traditional fixed-income assets, although they carry higher risk, Schroders said.

Schroders emphasised that embracing alternative investments allows both investors and asset managers to collaborate on building more resilient portfolios, better equipping them to navigate today's market challenges and opportunities.