Investing, reimagined

At UBS’s Unified Global Alternatives (UGA), we cater to growing client demand for multi-alternative solutions. So what are these solutions, and why are they becoming increasingly prominent in client portfolios?

Multi-alternative solutions combine different alternative asset classes within a single investable vehicle. They typically include private equity, private credit, infrastructure, real estate, and hedge funds.

By bringing these strategies together under a unified governance and risk management framework – and employing active management – multi-alternative solutions allow investors to access a broad range of return drivers while benefiting from integrated portfolio construction, diversification across strategies and vintages, and streamlined oversight.

Why are investors turning to alternatives?

In recent years, investors have steadily increased their allocations to alternative investments. This shift reflects a structural evolution in portfolio construction, driven by macroeconomic pressures, changing return expectations, and the need for more resilient diversification.

Alternatives broaden the investment universe beyond traditional markets, and a multi‑alternative approach brings these complementary strengths together within a single mandate. Private equity and venture capital offer access to fast-growing private markets; private credit provides an income-oriented complement; and real assets, such as infrastructure and real estate, contribute stable cash flows with potential inflation protection. By combining these distinct return drivers, a multi‑alternative portfolio may help deliver more balanced performance, improved diversification, and a smoother return profile across market environments than individual strategies alone.

Diversification is another key motivation. Many alternative strategies exhibit low correlation with traditional markets, helping to reduce portfolio volatility and enhance risk-adjusted returns. Hedge funds and absolute return strategies, in particular, aim to deliver performance across varied market environments and may offer downside protection during stress periods.

Growing institutional adoption has further accelerated this trend. Pension funds, endowments, and other large investors have long used alternatives as core portfolio components, demonstrating their role in long-term, multi-asset allocations. As alternatives become more central to portfolio construction, the question is no longer whether to allocate, but how to manage these exposures actively and thoughtfully over time.

Active portfolio management in uncertain times

Against this backdrop, private market portfolios can no longer rely on a passive ‘buy and hold’ mindset alone. Structural uncertainty, higher volatility, and shifting business models mean that risk does not disappear simply because assets are illiquid. On the contrary, longer capital lock-ups make it even more important to allocate actively and deliberately as market conditions evolve.

Active management in private markets is not about frequent trading. It is about making ongoing, evidence-based decisions on where capital should be allocated, maintained, overweighted, or reduced. Rather than switching whole asset classes on or off, investors need to differentiate within and across private markets – by strategy, manager quality, capital structure, cycle positioning, and liquidity profile.

This conviction-based approach is becoming increasingly important. It calls for investments to be assessed across several dimensions, including performance drivers, manager resilience, the broader market environment, specific risks such as leverage or concentration, and liquidity terms. Together, these dimensions form a dynamic view of conviction that should be reviewed regularly as new information becomes available.

In this sense, being active does not mean making large directional bets. It means building portfolios through many smaller, well-founded decisions that are diversified, disciplined, and grounded in transparent risk assessment. Over time, the cumulative effect of these deliberate allocation choices may be more valuable than that of a small number of sweeping calls, particularly in an environment where uncertainty has become a lasting feature rather than a temporary disruption.

Alpha and the illiquidity premium

Multi-alternative mandates are designed to access return sources that go beyond traditional market beta. Alpha remains scarce in public markets but is generally considered more accessible in alternatives, where inefficiencies, complexity, and active ownership create opportunities for skilled managers to generate excess returns. By combining multiple strategies, multi-alternative portfolios diversify these alpha sources and reduce reliance on any single manager or approach.

At the same time, investors are compensated for committing capital over longer horizons. The illiquidity premium reflects the additional return that may be available in private markets, where capital is locked up and flexibility is limited. Capturing this premium requires both patience and disciplined execution.

By integrating liquid and illiquid strategies, multi-alternative mandates balance flexibility with return enhancement, providing a structured way to seek exposure to both alpha and illiquidity premia within a diversified portfolio.

Inflation protection

Exposure to real assets within multi-alternative portfolios may help mitigate the impact of rising inflation. Infrastructure and real estate investments, in particular, tend to benefit from revenue models that can adjust over time, whether through contractual indexation, regulated pricing, or underlying market dynamics. In addition, assets with strong pricing power or scarcity value, such as certain commodities or core infrastructure, may further support performance in inflationary periods.

This combination of income stability and price adaptability can help preserve real cash flows and may make these assets less vulnerable to inflation shocks than traditional fixed income, which typically faces headwinds from rising rates.

Hedging volatility

Multi-alternatives also contribute to portfolio resilience by helping to hedge market volatility. Strategies such as hedge funds and other absolute return approaches employ flexible, unconstrained techniques – including long/short positioning, relative value trades, and opportunistic allocations – to help navigate changing market conditions.

By targeting low correlation with equities and bonds and focusing on capital preservation, these strategies may provide downside protection during periods of market stress. Within a diversified multi-alternative framework, they help smooth return profiles and reduce the severity of drawdowns.

Smoother returns

Alternative assets can help improve the stability of portfolio returns, particularly for investors with defined obligations. Their appeal lies not only in their return potential but also in how those returns are generated and experienced over time.

Private market investments are less exposed to the continuous pricing and short-term sentiment that drive public markets. Valuations are updated periodically, which reduces the transmission of day-to-day volatility into reported performance. At the same time, the inherently lower liquidity of these assets limits the likelihood of forced selling, which may help mitigate the sharp drawdowns often seen in stressed market environments.

The result is a return profile that tends to be more stable over time. Within a well-diversified multi-alternative allocation, this can help improve overall portfolio resilience while maintaining exposure to long-term growth drivers.

Risks

The benefits of alternative investments come with clear trade-offs. Most notably, the illiquidity premium requires investors to accept limited flexibility, longer lock-up periods, and a genuinely long-term investment horizon.

Manager selection is equally critical. The dispersion of returns within private markets is typically wider than in public markets, making access to experienced and disciplined managers a key driver of outcomes.

Finally, complexity and cost should not be underestimated. Alternative investments demand rigorous due diligence, ongoing monitoring, and careful portfolio construction. Fees can be higher and structures more intricate, reinforcing the importance of a thoughtful and selective approach.

Simplifying access

Multi-alternative solutions are designed to address many of the traditional barriers to private markets. By pooling expertise, manager selection and portfolio construction within a single framework, they can provide more efficient and cost-effective access to a diversified set of alternative strategies.

In doing so, they can reduce operational complexity for investors. Structures such as feeder funds, combined with increasingly digitalized subscription processes, have streamlined implementation and lowered minimum investment thresholds.

Rather than navigating each asset class individually, investors can access a curated, institutionally constructed portfolio through a single entry point.

Blending liquidity profiles

An important feature of modern multi‑alternative solutions is the ability to blend open‑ended and closed‑ended strategies within a single portfolio. This approach allows investors to calibrate liquidity, duration and return objectives more precisely, rather than treating alternatives as a uniform allocation.

Open‑ended strategies provide periodic liquidity and greater flexibility to adjust exposures over time, while closed‑ended strategies require longer capital commitments but are typically associated with higher return potential through active ownership, operational improvement and the capture of illiquidity premia.

By combining these structures within one mandate, multi‑alternative portfolios can balance near‑term liquidity needs with long‑term return enhancement. This integrated design supports smoother portfolio management, reduces cash drag, and allows capital to be recycled efficiently as market opportunities evolve. For clients, it can provide a more tailored solution aligned with their time horizon, cash‑flow requirements and risk tolerance.

Co‑investments as a growing building block

Co‑investments are becoming an increasingly important component of multi‑alternative portfolios. By investing directly alongside lead sponsors in selected transactions, co‑investments may improve return potential through lower fee structures, reduced blind‑pool risk, and targeted exposure to high‑conviction opportunities.

Within a multi‑alternative framework, co‑investments offer additional diversification benefits and greater control over portfolio composition. They allow investors to tilt exposures toward specific sectors, geographies or themes, while complementing commingled fund allocations. When sourced selectively and integrated thoughtfully, co‑investments can help improve capital efficiency and support overall portfolio outcomes.

Access, however, is critical. Successful co‑investment programs rely on deep manager relationships, strong origination capabilities and robust underwriting expertise. When embedded within an institutional‑grade multi‑alternatives platform, co‑investments become a scalable and repeatable return driver rather than an opportunistic add‑on.

Code: M-006753