Everyone has one. A friend, a colleague, a bloke from the golf club, who at some point in the last few years has casually mentioned that they’ve “put some money into” whisky, wine, art, or some kind of overseas land scheme, usually with the air of someone who’s discovered a secret the rest of us are too boring to have noticed. Sometimes it works out. More often, a few years later, the same person goes quiet whenever the topic comes up.
“Alternative investments” is a huge umbrella term, and lumping it all together does it a disservice. “Unregulated” in particular gets thrown around as if it were a synonym for “dodgy,” but that’s not really fair either. Plenty of perfectly sound, asset-backed investments sit outside the FCA’s regulatory perimeter simply because of how they’re structured, not because there’s anything wrong with them, and some of them offer genuinely attractive returns precisely because they’re less picked-over than the mainstream stuff. The trick is telling those apart from the other end of the spectrum: products where “unregulated” really does mean “nobody’s checking whether any of this is real.” Let’s sort through it.
The Tangible Asset Scams: Whisky, Wine, Art, and Land
I’ll start with the one that’s had the most press lately: whisky cask investment. The pitch is seductive. You buy a cask of new-make spirit for a few thousand pounds, it matures in a warehouse for ten years, and rare whisky has reportedly grown around 430% in value over the past decade, comfortably outpacing gold’s roughly 250% and the S&P 500’s roughly 165% over the same period. Sounds brilliant.
Here’s the problem. Whisky cask investment is entirely unregulated in the UK. It isn’t overseen by the FCA, doesn’t fall under the Financial Services Compensation Scheme, and doesn’t give you access to the Financial Ombudsman Service if it goes wrong. The City of London Police and Action Fraud have both issued repeated warnings about cask investment schemes, with one company alone advertising “guaranteed” returns of 8 to 12% a year, claims the Advertising Standards Authority later ruled were misleading. The BBC’s investigation found hundreds of victims, casks sold that may not exist or are wildly overpriced, and brokers partnering with legitimate distilleries specifically to “borrow” credibility for what is, underneath, a sales operation with essentially zero oversight.
Wine, art, and the various “exotic land investment” schemes (palm oil plantations, overseas car parking spaces, biofuel land banks, that sort of thing) tend to follow a remarkably similar template: a real-sounding underlying asset, a story about scarcity and rising demand, a broker who isn’t FCA-regulated because the product technically isn’t a “financial instrument,” and returns that are either entirely fictional or based on a resale market that turns out to be far thinner than advertised when you actually try to sell. The common thread isn’t the asset itself, whisky, wine, and art are all perfectly real things with genuine collector markets, it’s that the investment structure wrapped around them is built to extract money from people who think they’ve found a clever loophole, when really they’ve found a sales funnel.
The FSCS Misconception, Properly Explained
This is where I want to clear something up, because I think the framing of “no FSCS protection” gets used as a scare tactic against unregulated investments generally, when actually it tells you much less than people assume.
A lot of people assume the FSCS is purely a savings account thing, the scheme that gives you your money back (up to £85,000, or £120,000 in some cases for certain temporary high balances) if your bank goes bust. That’s true, but it’s not the whole picture. The FSCS also covers a chunk of the regulated investment world too, up to £85,000 per person per firm, if your ISA, SIPP, or investment platform provider fails and there’s a shortfall in the assets they were holding for you.
But here’s the crucial bit that gets lost: the FSCS has never covered, and was never designed to cover, ordinary market losses. If you buy a perfectly legitimate, FCA-regulated FTSE 100 tracker fund through a regulated platform, and the market falls 20%, the FSCS does nothing, and rightly so, because that’s just investing. “FSCS protected” was never the gold standard people imagine, it’s a fairly narrow administrative backstop, not a guarantee against losing money.
Which means the absence of FSCS cover on an unregulated investment isn’t automatically the disaster it’s made out to be, provided there’s something better underneath it: a real asset, with real, enforceable security. A first legal charge over a specific property, registered at the Land Registry, arguably gives an investor something far more concrete than an £85,000 compensation cap, because it’s a direct claim over a tangible thing, not a promise from a fund with its own limits and queues. The question that matters isn’t “is this FSCS protected?” It’s “if this goes wrong, is there a real asset I have a legal claim over, or just a website and a brochure?” For whisky casks, art, and most exotic land schemes, the honest answer tends to be the latter. For well-structured secured property lending, it can genuinely be the former, which is exactly why that category deserves a fairer hearing.
Property Bonds: The Case for Going In With Your Eyes Open
Now to the category I think gets unfairly tarred by association. Property-backed bonds and secured loan notes, done properly, are one of the more sensible alternatives out there, and a big part of why they’re unregulated is simply that lending money against a property, secured by a legal charge, isn’t a “financial instrument” in the regulatory sense, it’s closer to a private mortgage. That doesn’t make it dodgy. It makes it a different kind of arrangement, with a different kind of protection: the asset itself.
The cautionary tale, and it’s worth knowing, is London Capital & Finance, which collapsed into administration in 2019 after raising almost £238 million from more than 11,500 retail investors, paying a fixed 8% return over three years. The problem with LCF wasn’t that it was unregulated lending in principle, it’s that the money wasn’t actually secured against much of anything real. It was funnelled into a tight network of connected companies, several sharing the same directors, with the promised security existing largely on paper. The Financial Conduct Authority later acknowledged its own failings in how the case was handled, and a separate compensation scheme was set up for victims.
But LCF is the example everyone reaches for precisely because it’s the exception, not the rule, and it’s a useful checklist of what to look for in the opposite direction. A well-structured secured property bond typically involves a first legal charge over a specific, identifiable property or development, an independent third-party valuation, a sensible loan-to-value ratio (so there’s a real buffer if the property needs to be sold to recover your money), and a borrower who isn’t simply another company controlled by the same people running the bond. When those boxes are ticked, you’re not relying on a compensation scheme or a regulator’s goodwill, you’re relying on bricks, mortar, and the Land Registry, which for many investors is a perfectly reasonable trade-off for a yield that comfortably beats a gilt.
Where I’d urge a bit more care right now is in the assumptions behind the numbers, rather than the structure itself. UK house price growth has slowed sharply, Nationwide reported annual growth down to around 1.7% in May, with the first monthly price fall of 2026, and housing completions are falling as developers grapple with higher financing costs and tighter viability margins. That doesn’t mean secured property bonds are suddenly a bad idea, it means the loan-to-value cushion matters more than it did when prices were rising 5% a year and covering up sloppy underwriting. If a bond is secured at, say, 60% loan-to-value against a recent independent valuation, a softer market is a manageable wobble. If it’s secured at 90% against a valuation from the top of the market three years ago, that’s a different conversation. Same goes for the exit: a development that needs to sell forty flats in a slowing market is a more realistic risk to weigh up than it would have been in 2021, but it’s a question of degree, not a reason to write off the whole category.
So What’s Actually Fine?
A great deal more than the doom-mongers suggest, frankly. Gold, held through a regulated, liquid vehicle like a physical-backed ETF, has a multi-century track record as a store of value and a small allocation can sensibly diversify a portfolio that’s otherwise all bonds and equities. Listed property funds and REITs give you exposure to commercial property through a regulated, exchange-traded structure. And, as above, well-structured secured property lending, where there’s a real asset, a sensible loan-to-value ratio, and a borrower at arm’s length from the people running the show, can be a genuinely useful part of a portfolio precisely because it sits outside the mainstream and isn’t competing for the same overpriced assets everyone else is chasing.
The pattern that should make you wary isn’t “unregulated” itself, plenty of perfectly good investments are unregulated simply because of how they’re legally structured. It’s the combination of illiquidity (you can’t easily sell), opacity (you can’t easily verify what you actually own or whether it’s secured against anything real), and “guaranteed” returns (which no genuine investment, regulated or otherwise, can promise). A secured loan against a named property with a registered legal charge and an independent valuation is a real thing you can point to. A cask in a warehouse you’ve never seen, a case of wine you’ll never taste, or a patch of palm oil land on the other side of the world that you’re told is “appreciating,” much less so. If a friend tells you about their cask, their case, or their cunning palm oil scheme, the kindest thing you can do is ask them what, specifically, stands behind their money, and whether they could sell it tomorrow if they needed to. The silence that often follows tells you most of what you need to know. Ask the same question about a well-structured secured property bond, and you’ll usually get a much more satisfying answer.
This article is a personal opinion piece for general information and does not constitute financial advice. Always check whether a firm is FCA-authorised using the FCA register before investing, and be wary of any investment promising guaranteed or unusually high returns. If you’re unsure, speak to a qualified financial adviser.