An alternative investment is an investment product that invests in an asset class that is considered as being outside of the three traditional asset types (which are shares, bonds and cash).
This broad definition makes it impossible to list all forms of alternative investment vehicles, but the most common types of alternative investments are hedge funds, private equity, venture capital, property, commodities and derivatives contracts.
The returns that can be obtained from investing in alternative investments are often viewed as having a low correlation with those derived from investing in more traditional asset classes. Alternative investments are therefore often used to help increase the diversification of an investor's portfolio.
Many alternative investment vehicles have a high threshold for minimum investments and higher fee structures when compared to more conventional types of investments such as funds or exchange traded funds.
While smaller, individual investors can to some extent be shut out of some alternative investment opportunities, exposure to asset classes such as property and commodities (e.g. precious metals) is generally fairly widely available and exposure to other types can be accessed via pooled investments.