“Many times what are touted as alternative assets, from private equity to private credit, from AIFs to Gift City schemes, are just a riskier version of what you already hold,” Mehra said.

‘Alternative’ does not always mean different

Mehra said investors often need to distinguish between the underlying asset and the structure through which it is offered.

A private equity fund, for instance, ultimately invests in businesses and companies, while an investment in an unlisted company remains an equity investment. Similarly, private credit is still fixed-income exposure, albeit with a different structure and risk profile.

The distinction matters because investors may assume that a product labelled “alternative” automatically provides diversification.

“Plus you would often find the structures being mixed up with the underlying assets, even by professionals,” she said.

Mehra also highlighted liquidity as one of the biggest risks associated with several private-market investments. Unlike listed securities, which can generally be sold relatively easily, exiting an unlisted investment can depend on finding another buyer or waiting for a fund to provide an exit.

That lack of liquidity can become particularly problematic during periods of market stress.

Higher returns come with higher risks

Mehra cautioned investors against focusing solely on the returns showcased by alternative investment products. Historical returns from a particular private-market strategy may not necessarily be replicated when more capital begins chasing similar opportunities.

Private credit, in particular, can carry risks that may not be immediately apparent from headline yields. When credit conditions deteriorate, borrowers can face difficulties and lenders may discover that the premium earned does not adequately compensate for the underlying risks.

The complexity of these products can also make it harder for investors to assess what they actually own.

“Remember the golden rule of not buying something you do not fully understand. Be super careful of exotica,” Mehra said.

Her message to investors is therefore less about rejecting alternative investments altogether and more about questioning the sales pitch.

For investors, the test should be whether they understand the underlying asset, risks, liquidity, costs and exit mechanism—not whether the product sounds exclusive or sophisticated.