What are the Risks and Benefits of Alternative Assets?


  • Kirill Vorobyev Gymnasium No. 116
  • Niklas Schmitz University of Cambridge




assets, finance, investment, Bitcoin, hedge fund, private equity, alternative assets


This paper explores the risks and benefits of alternative assets (private equity, hedge funds and cryptocurrency), and assesses whether they are worth investing in. The evaluation of the safety of the investments was done with the use of different measures of risk, such as maximum drawdown and standard deviation. I also calculated Sharpe ratio to compare different kinds of assets and correlation between them to understand how they would fit in a portfolio. The analysis shows that though cryptocurrencies (especially bitcoin) show very high returns, the risk of fall is too large to consider them as safe investments. Broadly speaking, the safest type of investment in alternative assets are hedge funds as their main goal is “to hedge risks”. Private equity is much riskier than hedge funds, but its returns are more likely to be higher. Even with the safer investments, picking the right funds becomes crucial as performance of top-quartile funds and the others tend to differ significantly. Correlation is high between hedge funds, private equity and stocks, and low between bitcoin and other types of assets. In general, the market of alternative assets is very prospective and investors should consider them as possible diversifiers in their portfolios.


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Author Biography

Niklas Schmitz, University of Cambridge


References or Bibliography

PricewaterhouseCoopers International Limited, “Rediscovering alternative assets in changing times”, 2018 (PwC 2018)

Antii Ilmanen, “Expected returns on major asset classes”, 2012 (Ilmanen 2012)

Donald R. Chambers, Keith H. Black, Nelson J. Lacey, “Alternative investments: a primer for investment professionals”, 2018 (Chambers et al. 2018)

PitchBook Data, Inc., “Global fund performance report (as of q4 2020 with preliminary q1 2021 data)”, August 31, 2021 (PitchBook 2021)”

Matt Hougan, David Lawant, “The Guide to Bitcoin, Blockchain, and Cryptocurrency for Investment Professionals”, 2021 (Houghan and Lawant 2021)

Allison Nathan, Gabriel Lipton Galbraith, Jenny Grimberg, “Goldman Sachs global investment research”, May 21, 2021 (Goldman Sachs 2021)

Michael Maiello, Chicago Booth Review, “Newer investors are driving Bitcoin swings”, September 23, 2021 (Chicago Booth Review, September 2021)

Ray Dalio, “The Future of Everything Festival,” The Wall Street Journal, May 11, 2021 (The Wall Street Journal, May 2021)



How to Cite

Vorobyev, K., & Schmitz, N. (2022). What are the Risks and Benefits of Alternative Assets?. Journal of Student Research, 11(1). https://doi.org/10.47611/jsrhs.v11i1.2669



HS Research Articles