The wealthiest Americans are more likely to invest in these alternative assets than their counterparts abroad.

With record-high interest rates and inflation eroding investment returns, alternative investments have gained new popularity among the wealthiest.

Alternative investments are any investments outside of traditional assets such as stocks, bonds, and cash. They can include real estate, hedge funds, and private loans, as well as more exotic assets such as rare whiskey, shiny diamonds, classic race cars, luxury handbags, and unique trading cards.

In a challenging economic environment where traditional investment strategies such as asset diversification (buying different types of investments to spread risk) are not as effective, investing outside of traditional asset classes can help bolster the portfolios of ultra-high net worth individuals, or those with assets of $30 million or more.

Wealth Enhancement Group analysed survey data from consulting firm Knight Frank to illustrate how wealth advisers are investing their clients’ money in alternative investments.

Art, classic cars, wine and rare whiskey top the list of “passion investments” that are becoming increasingly popular with financial advisers’ clients, according to the study. The alternative asset class has surged in popularity in recent years, peaking at 15.5% in 2022 but falling to 14.9% last year, according to JP Morgan.

Alternative investments can also include cryptocurrencies, which could come under pressure due to the high demand for electricity to power computers in cryptocurrency mining operations. Some 65% of UHNWIs say they are trying to reduce their carbon footprint, while 24% review their investments for ESG (environmental, social, governance) compliance.