Top Alternative Investments in the UK for 2025

Alternative investments have gained significant traction in recent years. Whether due to growing frustration with traditional stock markets or a desire to make their capital work harder, investors are increasingly turning to these assets. For instance, in Q1 of 2025, global venture capital funding reached an impressive $126.3 billion, with the UK leading Europe by investing over £4 billion.

With the increasing demand for alternatives, many UK investors are looking to allocate capital in these asset classes, which have shown resilience in the face of external economic volatility. Before diving into any specific investment, it’s crucial for investors to research the different alternatives available to determine how they might best mitigate current economic challenges.

In 2025, the most attractive alternative investments in the UK are likely to be found in the following categories:

• Private Equity
• Venture Capital
• Property
• Peer-to-Peer Lending
• Private Debt
• Collectables
• Commodities
• Infrastructure
• Structured Products

Each of these asset classes offers distinct advantages, and understanding how they function is vital for any investor looking to diversify their portfolio.

What Are Alternative Investments?

Alternative investments refer to assets that don’t fall into traditional categories like equities, bonds, or cash. These types of investments typically offer low correlation with public markets, which makes them an excellent tool for portfolio diversification. They also often serve as a hedge against inflation and can provide superior returns. However, they come with reduced regulation, meaning investors must conduct thorough due diligence.

By 2028, PwC estimates that $27.6 trillion will be allocated to alternative assets globally. High-net-worth individuals (HNWIs) are increasingly leaning toward these assets, with KKR’s research showing that families managing over $1 billion hold 51-54% of their assets in alternatives. Furthermore, from 2017 to 2020, the proportion of assets held by HNWIs in alternative investments rose from 22% to 26%.

How Alternative Investments Differ from Traditional Assets

There are several key differences between alternative investments and traditional asset classes:

• Liquidity: Alternatives are often more illiquid compared to traditional assets, which are easier to buy and sell.
• Market Correlation: Alternative investments tend to be less correlated with public markets, while traditional investments typically follow market movements.
• Diversification: Alternatives provide stronger portfolio diversification, reducing overall volatility.
• Regulation: Alternatives are less regulated, giving investors more flexibility but also requiring a more sophisticated understanding of the market.

Now, let’s take a closer look at some of the best alternative investment options for 2025.

Private Equity

Private equity (PE) involves investing in non-publicly traded companies. These investments generally focus on boosting company growth or preparing them for acquisition or an IPO. PE investments typically provide substantial long-term returns and, in some cases, offer regular dividends, which can serve as a stable income source during times of economic uncertainty.

Despite global challenges, PE has been resilient, with 2021 recording a $1.2 trillion value in mergers and acquisitions, which was 50% higher than the previous record. For investors seeking to diversify and expand their portfolio, PE remains an attractive option.

Venture Capital

Venture capital (VC) focuses on investing in early-stage, high-growth startups. These businesses often have the potential to reshape industries and bring innovative solutions to market. In 2025, VC could be one of the best alternative investment choices, especially in the UK, where it benefits from tax-efficient schemes such as the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).

These tax wrappers offer up to 50% income tax relief on investments of up to £200,000, exemptions on capital gains and inheritance tax, and risk minimization through loss relief. The emphasis on social impact through these startups makes VC a powerful investment choice for those looking to make a difference while achieving strong returns.

Property

Property investment has been a staple for many investors, and it remains an attractive option in 2025. With UK property prices hitting a record high, driven by changing work, shopping, and living habits post-pandemic, property investments stand to benefit from these long-term shifts.

For those seeking a hands-off approach, joint venture (JV) property investments provide a way to invest in development projects without the need for direct involvement in day-to-day property management. These investments have become more accessible to individual investors, thanks to the rise of online platforms and specialist partners.

Another hands-off option is property bonds, which are asset-backed, fixed-term investments offering attractive returns. Products like Carlton Bonds, which offer up to 10% annual returns, can be ideal for investors seeking a stable, short-term investment opportunity.

Peer-to-Peer Lending

Peer-to-peer (P2P) lending connects individual lenders with borrowers, typically through online platforms. P2P lending is an excellent option for investors looking to earn higher returns than those offered by traditional savings accounts or government bonds. With interest rates often higher than 4% APR, P2P lending offers investors the potential for lucrative returns.

The demand for P2P loans is expected to grow in 2025, as traditional bank loans become less viable for businesses and individuals. Furthermore, P2P lending via tax-efficient investment vehicles like the Innovative Finance ISA (IFISA) can provide additional tax savings, making this an attractive alternative investment.

Private Debt

Private debt refers to loans made to private companies or individuals, often provided by non-traditional lenders such as institutional investors or wealthy individuals. Unlike private equity, which involves owning part of a business, private debt focuses on earning returns through interest payments on loans.

In 2025, private debt continues to be an appealing investment, particularly as it offers diversification and access to previously inaccessible markets. The growth in direct lending and distressed debt strategies post-pandemic has boosted the appeal of this asset class, especially for investors seeking stable income and lower exposure to public market volatility.

Collectables

Collectables such as fine art, rare wine, classic cars, and luxury watches have become increasingly popular as alternative investments. While this market can be niche and requires expertise, some collectables have seen massive value increases. For instance, rare whisky has increased in value by 478% over the past decade.

However, the collectables market is subject to fluctuations, as seen during the Covid-19 pandemic when in-person auctions and supply chains were disrupted. Despite this, luxury goods and high-end collectables remain attractive for investors with specialized knowledge or a passion for certain items.

Commodities

Commodities, such as oil, natural gas, and agricultural products, offer an intriguing alternative investment option. These assets can act as a hedge against inflation, which is particularly relevant in today’s economic climate. As inflation rises, commodities often perform well, helping to protect the value of investor portfolios.

Infrastructure

Sustainable infrastructure investments, such as renewable energy projects, are becoming more attractive in 2025. With global demand for energy resources expected to surpass the Earth’s capacity by 2050, the transition to renewable energy presents both a financial opportunity and a chance to make a positive environmental impact.

Renewable energy infrastructure is now cheaper than fossil fuels in many regions, which enhances the potential returns for investors looking to capitalize on this growing market.

Structured Products

Structured products are pre-packaged investments that derive their value from underlying assets such as stocks, bonds, or commodities. These products provide investors with tailored exposure to markets that might otherwise be difficult to access. As the structured finance market continues to grow, these products will likely become more attractive to investors seeking customized investment strategies.

Conclusion

Alternative investments offer UK investors a broad range of opportunities in 2025, with each asset class providing distinct advantages. Whether it’s for portfolio diversification, superior returns, or the opportunity to invest for impact, alternatives present an exciting option for experienced investors. However, they come with their own set of risks, including lower liquidity and less regulation. Thorough research and due diligence are essential before diving into these asset classes to ensure they align with your investment goals.

As the landscape continues to evolve, alternative investments are becoming an increasingly important part of many portfolios, helping investors navigate economic uncertainty and seize growth opportunities in 2025.