Why should you consider including alternatives to your portfolio? How have multi-strategy funds performed over the last several years? Learn about today’s most effective hedge fund strategies and how to incorporate them into your portfolio with our “Hedge Funds 101” whitepaper, with practical tips on alternative investments, multi-strategy funds, long/short equity and event-driven strategies and distressed debt and credit opportunities.
Alternative investment strategies seek to achieve positive returns by pursuing investments that are outside the traditional long-only portfolios of equities and fixed income.
Many of these strategies have low correlations to traditional stock and bond asset classes, which helps improve return potential compared with traditional-only portfolios at equivalent risk levels. The popularity of alternatives has grown rapidly since the 2008 financial crisis. According to Prequin, alternative assets under management stands at $7 trillion in 2015.
Why Use Alternatives?
The addition of alternatives to a traditional long equity and fixed income portfolio can improve efficiency, due to alternative strategies having lower correlations with the traditional asset classes. Effective alternative strategies can offer higher expected returns per unit of risk than traditional long equity or fixed income strategies. Alternatives can also offer additional diversification benefits, including hedging against inflation, interest rate volatility, and market risk.
The addition of alternatives to a portfolio can improve returns over a traditional-only portfolio for any given risk level. Some of the prevalent hedge fund strategies are: