The Benefits of Alternative Investment Strategies

For many years now, we have explored the investment industry to uncover investment strategies that offer a different experience than traditional stocks and bonds.

We still believe in the value of allocating stocks and bonds into clients' portfolios. However, due to continued volatility of the publicly traded markets, we feel it is important to consider alternative options.

Alternative investments, also referred to as non-traditional investments, include all investment types other than stocks, bonds, or cash, and aim to deliver returns with little to no correlation to these traditional asset classes. 

Typical forms of alternative investments used in Canada include mortgage investments, private real estate, private equity, and liquid alternatives.  

Alternative investments can dramatically improve the risk-return profile of a portfolio and are fast becoming a requirement for a properly constructed portfolio.

Some of the advantages of having an allocation to non-traditional investments include:

Diversification
Not putting all your eggs in one basket. Traditional diversification has resulted in many investors having too much of their money in one asset class, publicly traded stocks.

Flexibility
Greater flexibility to innovate with private investments, real assets, and prudent leverage. 

Low Correlation
Alternatives behave differently from the stock market due to their uniquely low or negative correlation to publicly traded stocks and bonds. 

Customization
Globally, institutional investors are moving away from the traditional 60/40 model and using alternative solutions to meet their risk and return objectives.

Downside Protection
Non-traditional investments have little or no correlation to publicly traded stocks and bonds so as an addition to an investors' portfolio they can significantly reduce the risk of experiencing the full drawdown of a Bear Market.

It is important to note, like any traditional investment, alternative investments still carry a level of risk. It is essential to understand what those risks are, whether you are comfortable with them, and if your plan would ultimately benefit from an allocation.