Time horizon, liquidity are key for alternatives

By Suzanne Yar Khan | June 2, 2025 | Last updated on June 2, 2025
3 min read
iStockphoto/sorbetto

Alternative investments can offer investors enhanced returns with less risk compared to public investments, says Meric Koksal, managing director and head of product at CIBC Asset Management.

That’s because alternatives are often uncorrelated to public markets, she said in a May 21 interview. “Adding them to your asset allocation typically reduces the overall risk or volatility of the portfolio.”

Further, investing in private markets provides investors access to companies in a more diverse range of industries and geographies, she said.

“Almost 85% to 90% of companies by count are held privately,” she said. “So when investors are looking at only public markets, they’re really getting exposure about 10% to 15% of what is available for investment out there.”

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

Koksal detailed the three areas in alternative assets that wealth investors have access to: private equity, private credit and real assets.

Private equity

Private equity can be considered for the equity allocation of a client’s portfolio. It allows clients to invest in the early stages of a company’s development, compared to public markets where the opportunity comes when the company is relatively mature with a steady revenue stream, noted Koksal.

“There is more risk involved [in early-stage investing], and that is why they tend to deliver higher returns than what you may see in public markets,” she said.

Private credit

Private credit is a great fit for a client’s fixed-income allocation, she said.

“These strategies effectively aim to pay a steady income to clients, typically on a monthly basis. And this income tends to be higher than what investors can achieve in public markets, even in the high-yield space.”

Koksal noted returns tend to be in the low teens range.

Real assets

Real assets help diversify a client’s portfolio by adding to their equity and fixed-income allocation, while also providing a hedge against inflation, she said.

“As the cost of living rises, the value of these physical assets, and the income they generate tend to increase as well.”

As with all investments, there are several factors to consider before adding them to client portfolios. Koksal said advisors should review client goals, time horizon and liquidity needs. Alternative investments should be considered longer term, and currently only offer quarterly liquidity.

“This is very important when considering investment in private markets for clients that have very specific and constrained daily liquidity needs,” she said.

Another key consideration is a client’s risk tolerance, she said. Due to liquidity constraints, alternatives are considered medium to high risk.

She also suggested advisors explain how fees for alternatives differ from traditional investments. “A lot of the investments that you will see will involve a management fee, as well as what’s referred to as performance fee,” she said.

And before adding alternatives to client portfolios, advisors should do their research by reviewing educational resources that cover the benefits and nuances of these investments, she said.

“It’s very critical for advisors to provide regular updates to their clients once these private investments are introduced in the portfolio,” she said.

Koksal’s episode of Advisor to Go was the second in a two-part series on alternative investments. Check out part one, where CIBC’s David Wong discussed the evolution of alternative assets.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.

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Suzanne Yar Khan

Suzanne has worked with the Advisor.ca team since 2012. She was a staff editor until 2017 and has since worked as a freelance financial editor and reporter.