Using alternative investments allows investors to hedge against changes in the market and still see positive returns. Commodity ETFs and real estate investments offer investors options outside of traditionally “safe” investments. The rise of popularity in alternative investments has led to the acquisition of many smaller, specialized firms with specific industry knowledge that claim to understand how to best profit from the many asset classes.
Alternatives Firms Get Gobbled Up (Pensions & Investments, January 9)
Alternative investment consultants are being acquired by general investment consultants. Although acquiring these smaller firms are allowing larger firms to expand their offerings across asset classes, there is potential for conflict of interests. Industry insiders worry that larger firms will have to diversify their consulting services beyond the asset management divisions and that could raise red flags. There are also concerns that as the smaller firms disappear, it will be harder to find consultants with focused specialties and deeper insights into specific industries.
Why Look to Precious Metal ETFs in the Current Market Environment (ETF Trends, January 12)
Precious metal ETFs offer investors a way to “diversify a traditional equities and fixed-income portfolio after an extended bull run.” Investors are using commodity ETFs to minimize risk since they have shown low correlations to global and U.S. equities. The author of this article believes investors hedging against turns in the market are choosing alternative investments such as “real estate investment trusts, commodities and especially precious metals…”
Alternatives and Roles They Play in Asset Allocation (WealthManagemet.com, December 20)
Investors strive for portfolio diversification to reduce risk and increase returns. However, adding global investments is not the only way to create diversification. Those investors who did not consider alternative investments did not have the protection they anticipated during the credit crisis. Alternative investments offer different funds and industries to choose from with each providing different benefits. Investors need to “look at all factors including what risk(s) you are trying to protect against, as well as how correlations fluctuate during different market cycles.
Investing in Times of Uncertainty (Forbes, January 13)
In times of global uncertainty, investors look for ways to diversify and lower risk within their portfolio. Traditionally safe investments such as gold and defensive stocks have been popular options during volatile cycles. However these investments “often require a substantial time investment in analyzing the underlying asset.” ETFs are another option for investors and can have lower trading costs and higher transparency than traditional investments. Managing risk in an uncertain market is a challenge that investors need to plan for.
Liquid-Alt Mutual Funds Disappoint (Barron’s, December 24)
This subscription-based article looks at the performance of liquid-alternative mutual funds through 2016 and into the coming year. These funds have “failed in their promise of diversification and volatility damping,” which is becoming more important with economic uncertainty and rising interest rates. Managed-futures funds were the best performers “in terms of flows…Part of the appeal has been their ability to weather bouts of volatility.” The expectation is that once the market changes, liquid-alternative funds will be an asset in a portfolio.
Read more articles by Anna Sachar
