Understanding the Potential of Alternative Investments

Investors are increasingly turning to alternative investments as a way to improve portfolio outcomes.

This shift towards alternatives is occurring for a number of reasons: the availability of new vehicles to access alternatives, greater recognition of their benefits, and perhaps most importantly, a rise in global equity/global bond correlations.

The traditional mix of public stocks and bonds has often failed to offer the resilience most investors would prefer. A potential solution to this diversification conundrum is to add alternatives to a portfolio.

Although “alternatives” means different things to different people, the standard definition is investing outside traditional stock, bond, and cash instruments. They can bring a range of benefits to a portfolio: enhanced risk-adjusted returns, income generation, risk mitigation, and inflation hedging.

We believe the four key alternative assets are real estate, infrastructure, private equity and private credit. Although there are many other alternatives, each with their own advantages, we believe these are the main alternatives investors may want to consider. Together they can strengthen portfolios and increase diversification.

Exposure to Alternatives May Provide Attractive Returns with Less Risk