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Pension Style Asset Classes

Optimize Team July 20, 2023
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What are Pension Style Asset Classes?

A Pension Style Asset (PSA) refers to any investment outside of traditional stocks, bonds, and cash. 


PSA investments can take many forms, such as: 

  • Real Estate
  • Private Equity
  • Private Investment Funds
  • Private Debt
  • Infrastructure


These alternative investments are typically less liquid and more complex than traditional investments. However, they offer unique benefits and opportunities for investors.


What are the Benefits of PSAs?


One of the primary benefits of PSAs is diversification. By investing in assets that behave differently from stocks and bonds, investors can reduce their portfolio's overall risk and potentially increase returns. For example, real estate investments may be less volatile than stocks but offer the potential for higher, long-term returns.


Another benefit of PSAs is the potential for higher returns. Some PSAs, such as private equity and venture capital, can offer significantly higher returns than traditional investments. These investments often require larger minimum investments and longer holding periods but can be rewarding for investors who are willing to take on more risk.


In addition, PSAs can provide protection against inflation. Many alternative investments, such as commodities and real estate, are physical assets that can hold their value in times of inflation or currency devaluation. This can help investors maintain their purchasing power and protect their wealth over the long term.


However, PSAs are not without risks. They can be subject to greater volatility and liquidity risk. They can also be more difficult to value and may require specialized knowledge and expertise to invest in successfully.


Pension Style Asset Classes offer a range of benefits for investors who are willing to diversify their portfolios beyond traditional investments. They can provide the potential for higher returns, protection against inflation, and unique investment opportunities that may not be available through traditional channels. However, investors should carefully consider the risks and seek professional advice before investing in PSAs.