Alternative Investments

Are you weary of the same jargon your financial advisor gives you regarding market fluctuation? If you continue to be told that buying and holding is the way to build wealth, regardless of the type of market we are experiencing, then you've arrived at the right place. 

After the global financial crisis of 2007-2009, I knew I needed to create an opportunity for my clients where new ideas and creativity would be accepted. Following the meltdown, it's likely that you have a new respect for risk management. Previously, a basket of blue chip stocks and high quality bonds provided diversification to weather disaster. What the recent turmoil has taught us is:

  • Current interest rates may not support a credible return for the fixed income portion of your portfolio
  • Historical correlation between asset classes can break down during periods of crisis
  • Because of these facts, we believe the theories of buy and hold and traditional portfolio diversification needs to be altered

A new asset class, broadly titled, “alternative investments” have been available to institutions and high net worth investors for many years. This class consists of hedged equity, global fixed income and risk-managed alternatives. A very brief explanation of these is as follows:

  • Hedged equity generally provides exposure to the appreciation potential of stock, while aimed at reducing the volatility of the return
  • Global fixed income can provide exposure to potentially higher yielding securities, as well as diversification from a US-only portfolio
  • Risk managed investments, broadly defined, are those not limited to long-only stocks and bonds. They further diversify a portfolio by using techniques such as shorting and hedging. The use of these strategies can potentially create returns that do not correlate (they move in the opposite direction) to the market indices. They can also invest in commodities and currency.

This combination of non-traditional investments and rather sophisticated techniques can provide clients with increased diversification and strong risk-adjusted returns. Alternative investments are not suitable for all investors as they involve substantial risk including loss of principal, market risk, and no guarantee of any investment result. Investors must meet specific suitability standards before investing and understand these investments are for a long-term investment horizon. International investments are subject to certain risks, such as currency fluctuations, economic instability, and political developments, not present with domestic investments.