Investments in areas such as renewable fuels and water have grown by more than 20 per cent annually over the last three years, according to one Dublin investment manager.

Eoin Kennedy, investment product manager with New Ireland Assurance, says that while some areas of alternative investment carry more risk, they can potentially deliver more growth than conventional portfolios.

He estimates that four areas - alternative energy, water, emerging markets and commodities - delivered 26 per cent annual growth over the last three years.

However, he warns that these investments carry more risk. "These are higher risk funds, most of the areas tend to be more volatile," he says, "but if you look at emerging markets, India and China are undergoing huge growth and eastern Europe is very much like this country 15 years ago.

"If you want to invest in these areas, there will be more risk, it will be more cutting edge, but if you are looking for higher growth, you will have to take more risk."

The volatile nature of the countries where much of the world's oil and gas is found is one reason why investing in companies developing alternative energy has the potential to deliver growth, he says.

Similarly, water is a globally finite resource on which increasing demand is being placed.

New Ireland Assurance is launching a new investment fund focused on these areas; 80 per cent will be placed in alternative energy, commodities, emerging markets and water and the remaining 20 per cent will be discretionary.

It would have delivered almost 21 per cent annual growth over the last three years.

Mr Kennedy says New Ireland is not predicting that level of expansion, but says alternative investments should outpace equity markets by a few percentage points in the near term.