Numerous studies have shown that alternative investments create the potential to increase an investment portfolio’s return while reducing its volatility. Two key factors highlight why alternative investment strategies are an attractive addition to an investment portfolio:
- the potential for low correlations with traditional asset classes,
- the flexible investment mandate whereby the goal of the manager is to generate positive returns, rather than compete against a benchmark or peer group.
However, because of their extremely high minimum investment requirements and limited liquidity, alternative strategies have not been easily accessible to most individual investors. With a growing interest in employing alternative strategies, and with increasing, albeit limited options today to the average investor, there is a tremendous need to offer liquid alternative investment products to advisers in a user-friendly construct to allow them to appropriately add value to their clients’ portfolios.
Lowering a portfolio’s overall volatility can create greater wealth over time, by a) allowing the power of compounding to work more effectively, and b) mitigating the behavioral challenges facing investors to allow them to adhere to their plan and longer term objectives.