Alternative investments should be a staple part of any portofolio.

Arthur Steinmetz; Chief Investment officer at OppenheimerFunds Inc. today said that the 10-year slump in equity prices has been driving appetite for alternative investments, which risk being tarnished as a fad, suitable only during periods of volatility in equity markets

Speaking today at a portfolio managers’ conference organized by Bloomberg Link in New York, Steinmetz said that investors should always hold alternative investments in their portfolios, even if volatility settles down

According to Steinmetz, “What we all know is for the last decade, stocks have stunk and that has meant there’s been increasing focus on anything that doesn’t go down the way stocks go down. That gives rise to a bit of a faddish element around searching for non-stock-like assets. Alternatives have always been a good idea. We used to call it diversification.”

Alternatives investments can include any asset other than stock, bonds and cash, and appeal to investors seeking capital protection and an investment performance not correlated to the performance of equity markets. In the past five years, over $470 billion has been drawn out of equity market funds and re-invested in alternatives like forestry investments, agricultural investment and complex financial derivatives.

“Having a decade where stocks stink is somewhat anomalous,” Steinmetz said. “I question whether or not the current fad for alternatives will be quite so durable if we have few years of great stock market returns.”

In the ten years to 2012, the Standard & Poor’s 500 Index fell by 4.7 percent, and didn’t move at all last year, yet the financial returns derived from real assets like farmland and commercial timber plantations have been substantial, with annual returns of 15 percent to 20 percent over income and capital growth not uncommon. Furthermore, this investment performance has been delivered with almost no volatility by comparison to equity markets.

Diversification is the key. Investors should hold a variety of assets within their portfolios, with a common approach being 10 percent of capital allocated to real-asset investment alternatives that are unlikely to depreciate in the event of another financial crisis. It does seem like common sense that a portfolio exposed only to stocks, bonds and cash is at high risk of serious negative impact in the case of another market collapse, or even severe slowdown in the global economic recovery.

That all said, that fact of the matter is that the pervious/current financial crisis will certainly not be the last, so holding alternative investments in a portfolio on an on-going basis might seem prudent.