Contrast alternative assets with bonds as ways to reduce the risk of holding equities

Government bonds have traditionally cushioned equity falls with low or negative correlation, high liquidity and low cost, which makes them the default risk mitigator. They work less well when inflation drives the sell-off, because rising yields then hurt stocks and bonds together, and when yields are already low, limiting upside. Some alternatives, such as macro or tail-risk hedge funds, commodities and real assets, may protect better in those inflationary regimes. However, alternatives cost more, are less liquid, depend heavily on manager selection and often show smoothed returns that exaggerate their stability. A recommendation should weigh the expected inflation regime, liquidity needs and fees. The trap is assuming all alternatives mitigate equity risk; private equity largely adds more of it.