The Red Thread

Alternative alpha

2025/26 Edition

Explore more

An introduction from Barry Gill,
Head of Investments

Blurred line

“Good diversification means adding things that rhyme with nothing else in the portfolio.” - Cliff Asness

Alternatives have arguably become a defining feature of the modern investment landscape. Their rise reflects a structural shift in how investors think about diversification, liquidity and long-term value creation.

A thought-provoking game I like to play with colleagues and clients is to ask: what has happened to the average asset management fee over the last 20 years? Although they sense some mischief, the meteoric rise of index investing over this period seduces and anchors them downward. Yet their first instincts are right; the reality is that alternatives have stolen the share of wallet from active equity and fixed income managers, whose fees have been eroded by passive strategies. Counterintuitively, the average fee an asset management client pays has barely moved in two decades.

What we are witnessing is not simply a rotation of capital, but a fundamental reshaping of portfolios. The boundaries between public and private markets, between credit and equity risk, between liquidity and illiquidity, are increasingly blurred. Regulation and innovation are accelerating this shift. The democratization of alternatives, via evergreen funds, interval structures and long-term asset vehicles, is bringing what were once institutional-only exposures to a broader investor base.

This edition explores what this evolution means for investors. In The great portfolio reset, Jerry Pascucci and Johannes Roth outline how structural forces such as the AI infrastructure supercycle, the energy transition and once-in-a-generation investment into infrastructure projects will create opportunities for investors in alternative assets. They highlight the rapid innovation underway in investment vehicles and consider how AI is changing the investment process.

In Embracing alternatives in a supply-driven world, Evan Brown and Ray Fuller look at how supply-side forces are increasingly shaping economic outcomes and what this means for portfolio construction. Spoiler alert: increased allocations to alternatives.

Our guest interview features Delta Air Lines’ CIO Jon Glidden. We discuss his role in such a remarkable corporate pension turnaround, and the key role alternatives played. In When credit demand follows supply, David Mechlin and Eileen Liushow how the convergence of public and private fixed income markets is creating opportunities for allocators to think beyond traditional labels. Meanwhile, Claire Tucker and Michael Dwier examine whether the “Hedge fund juice” is still worth the squeeze as multi-strats, fund of hedge funds and single-strat managers navigate a rapidly bifurcating industry.

Finally, Larissa Belova assesses how Transition leads to opportunity in global real estate – from a more constructive interest rate environment to shifting valuations and structural demand shifts – reshaping the global property landscape and creating debt opportunities as banks retreat.

Across all these perspectives runs a common theme: the investment universe is no longer neatly categorized. The lines between asset classes, geographies and investor types are blurring, and with that comes both complexity and opportunity.

As always, I hope this edition provides clarity amid the blur – and sparks ideas for navigating the next phase of market evolution.

Barry Gill, Head of Investments, UBS Asset Management