Alternative Investments

Definition: An alternative investment is an asset that is not one of the conventional investment types, such as stocks, bonds and cash. Alternative investments include private equity, hedge funds, managed futures, real estate, commodities and derivatives contracts.

Investment Case:   Alternative investments typically have a low correlation with those of standard asset classes, which makes them suitable for portfolio diversification.   Some 'real assets' can be classified as alternative investments. 

Cost: The cost of access to alternative investment assets, managers or strategies will typically be higher than of traditional asset classes.  They may also offer reduced liquidity. 

Applied Academics:  The category of alternative investments is varied, broad and diverse.   Many large institutional funds such as pensions and private endowments use alternative assets and strategies.  This 'endowment model' allocates a significant portion of assets to non-traditional asset classes.  We focus on research found in the managed future space, showing large diversification benefits especially in down markets.



Noah Schwartz CFP