Benchmarking alternative investments against the S&P 500 is a widely used practice, but it often produces misleading conclusions. Public equities and alternative assets such as private equity, private credit, and real assets are fundamentally different in how they generate returns, manage risk, and behave over time.
This paper explains why the S&P 500 is not an appropriate benchmark for evaluating alternatives. Unlike public markets, alternative investments are driven by long-term value creation, contractual income, operational improvements, and real asset appreciation. Short-term comparisons to public equity indices can distort performance assessment and obscure the true role alternatives play in a portfolio.
A more effective framework is to benchmark alternatives based on their intended purpose. Income-focused strategies should be evaluated against yield targets. Inflation-sensitive allocations should be measured relative to inflation plus a spread. Most importantly, investors should assess how alternatives impact total portfolio performance, including risk-adjusted returns and diversification benefits.
For institutional investors and advisors, the key is not whether alternatives outperform the S&P 500 in any given period, but whether they improve portfolio construction through stability, income generation, and differentiated return streams.View Full Report