Commodities have historically outperformed stocks and bonds in periods when inflation is rising. Given the expectation for just that scenario, this is a good sector to consider investing in. The Cohen & Steers fund has allocated about 25% to 35% of assets to commodities. As much as 15% goes into gold. Even with gold trading at over $1,600 a troy ounce, the firm sees upside given supply and demand dynamics and the ability for the commodity to perform well in times of uncertainty. 10 Stocks Owned by Top Fund Managers Natural-resources equities include investments in energy, mining, metals and agricultural businesses. The thought here is that many natural-resources companies are tied to commodities diminishing in supply, allowing for price increases that are ahead of inflation. Up to a quarter of the fund is invested in this category. Investing in REITs has been a proven investment strategy in times of rising and declining inflation. As it stands now, commercial real estate still hasn't fully recovered from the large decline sustained in the 2008 financial crisis. In fact, valuations are very attractive and are expected to increase as the economy improves, while demand catches up with supply. That's already happening in multi-family REITs. Also making REITs an attractive investment is the solid dividends the group pays. Historically, dividend growth at REITs has outpaced inflation by over 300 basis points. This sector is allocated to 25% to 35% of the fund. The 10 Worst of the Worst in 2012 Alternative investments like commodities, natural-resources equities and REITs are a good way to mitigate volatility, protect against inflation and, when combining all three, generate returns in excess of standard stock and bond investments. -- Written by Lindsey Bell in New York. >To follow the writer on Twitter, go to Lindsey Bell.