The interview: Why alternative investments are growing essential to portfolio diversification, according to JBWere’s Gillian Gordon

Gone are the days when alternative investments made up a niche in the finance world, limited to institutional investors and the most sophisticated family offices. As volatility unsettles public markets, alternatives are steadily moving into the mainstream and becoming an important part of how ultra-high-net-worth families think about preservation, growth and legacy.

For Gillian Gordon, Head of Alternative Investments and Responsible Investing at JBWere, that has accelerated dramatically in recent years. “I started in my role at JBWere six years ago,” she recounts, “and at the time, it was really difficult to get exposure or access to alternatives. That was really the realm of the super funds or the institutional clients.”

Today, the landscape is markedly different. Gordon explains, “If you’ve got a traditional portfolio of bonds and equities, you’re no longer exposed to the entire market, and you’ve also got a lot of correlation challenges. Alternatives provide a diversification benefit to your portfolio.”

That changing correlation between public markets has become especially relevant in an era defined by inflation shocks, geopolitical instability and technological disruption. The classic balanced portfolio no longer offers the same certainty it once did. Increasingly, affluent investors are looking beyond listed markets for opportunities that behave differently, offer specialised exposure or tap into sectors unavailable through public exchanges.

“We are very lucky in the wealth space to have greater access,” Gordon remarks. “And that’s through a lot of innovation in the market, both globally and locally, to bring structures that are easier for private wealth to get access to.”

This democratisation, at least within private wealth circles, has transformed alternatives from niche allocations into strategic portfolio pillars. Education has evolved alongside too, with investors becoming far more conversant in the language of private markets. “Now, I would say that our clients are talking about these asset classes and wanting access, and that’s been a pretty big shift in the market. They’re asking a lot more insightful questions about their investments, and what they’re looking for is insight. ‘What is appropriate for my portfolio? What should I be thinking about? What am I missing and why?’”

That appetite is being fuelled by a deeper transformation in the nature of capital itself. Companies are staying private longer, and in many cases, some of the world’s most compelling innovation never reaches public exchanges at all. “In the last 10 years, there’s been almost a 30 per cent drop in listed companies that are available for investors to invest in,” Gordon notes. “And there’s been enormous growth in the private markets. If you think about the majority of the economies, particularly in the US and even in Australia, the majority of companies are private. They are small to medium enterprises, and they’re not listed on the market. So if you want access to those, you’ll want to get through the private markets.”

The implication is profound: investors relying solely on listed equities may be missing substantial areas of economic growth.

Defining alternatives

For many families, however, the appeal of alternatives extends beyond returns. It is also about customisation—constructing portfolios that reflect specific priorities, time horizons and even family values. 

This is evident in how different alternative sectors appeal to different investor objectives. Private credit has become increasingly attractive for those seeking steady income streams; infrastructure and real assets appeal to investors balancing yield with inflation protection; while private equity and venture capital continue to draw those pursuing long-term growth.

“It is such a broad spectrum that we try to think about which alternative is right for every client,” Gordon notes. “It’s hard to group them all into the same category but they do behave differently from traditional asset classes. As a general comment, I would say that they tend to have more illiquidity. So you want to be compensated for taking that illiquidity risk.”

That illiquidity can, paradoxically, become part of their appeal during periods of market turbulence. Because many alternatives are not priced daily, but rather on a quarterly basis, portfolios can appear less volatile over time.

Still, sophistication remains essential. Unlike listed markets, alternatives often involve greater complexity, information asymmetry and manager risk. “Experience really matters in this space,” Gordon says. “It’s a very high-touch asset class. The information tends to be more opaque.” She adds that there’s a lot of benefit to working with a partner, whether a private bank or wealth advisor, citing the need for due diligence, governance and long-term oversight.

The rise of values-based investing

Indeed, the long-term nature of alternatives is changing the tone of wealth conversations altogether. Multi-generational families are increasingly using investment strategy as a framework for discussing legacy, purpose and values.

“At JBWere, we are doing a lot of work in this space,” Gordon says. “We have run a number of workshops with multi-generational families, typically with up to three generations in the room thinking about what they want to achieve with their family capital, what is important to them, and what legacy and mission they want to pursue.”

“If I think about how they approach these conversations, there can absolutely be differences between generations in how they think about what they would like to invest in, and they may have different goals,” Gordon notes. “For example, the younger generation may have a longer-term time horizon. They may be able to take on a higher level of risk, more illiquidity in their portfolio, and a more growth-oriented approach. For family members who are older, they may be more interested in yield or a more regular return profile from their investments.”

Younger generations too are bringing new priorities into the conversation, from responsible investing to social impact and thematic exposure aligned with global change. “But I wouldn’t narrow that to just the younger generation. I would say that, across generations, that is a bigger topic that they’re looking to their wealth advisor for.”

The result is a broader redefinition of what constitutes a high-performing portfolio. It is no longer solely about outperforming benchmarks or maximising returns. Increasingly, it is about alignment—between wealth and purpose, growth and governance, risk and resilience. “When I speak with clients and advisors, every client is different with different goals and objectives,” Gordon says. “A high-performing portfolio is certainly in the eyes of the client about what they want to achieve.”

She does, however, point toward some big trends around the ‘D’s: decarbonisation, deglobalisation, digitisation and demographics. “These are multi-year thematics in a portfolio, and alternatives tend to be longer-term in their time horizon. So that’s what I see driving a lot of interest and investment in portfolios.” 

Ultimately, the appeal lies in adaptability—an ability to meet different investor needs without losing sight of the larger currents reshaping global markets. “Going back to what’s relevant for a client, if you’re the client just wants yield, there are ways that you can still access those bigger themes in a yield format, or if you want yield and capital growth, or if you want pure growth. That’s the beauty of alternatives; you get the full spectrum.”  

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